The Q- theory of investment postulates that high stock prices lead to high investment.

Question

Quizplus · Accepted Answer

The Q-theory of investment suggests that high stock prices signal high investment opportunities, leading to increased investment. This is based on the idea that when stock prices are high, firms can raise more capital and invest in profitable projects. Therefore, high stock prices are seen as a signal of the availability of profitable investment opportunities, which encourages firms to invest more. However, there may be other factors that also influence investment decisions, such as interest rates, government policies, and business conditions.

The Q- Theory of Investment Postulates That High Stock Prices