C. Edquist et H. Sjogren, No correlation between investments and profitability in Swedish industry? A study of industrial dynamics in Sweden 1975-1995, EKON SAMF T, 51(2), 1998, pp. 123
One of the most basic functions of the capital market is to transfer resour
ces from savers to investors - which includes movements of capital over tim
e and between geographical regions and sectors of production. Investments a
re generally assumed to enhance economic growth. Therefore a more precise w
ay to investigate the efficiency of capital markets is to test the hypothes
is whether Swedish material investments are made in those sectors which sho
w the highest profitability. Our conclusion is that there has, generally sp
eaking, not been a long-term correlation between a high rate of investment
and a high profitability during the latest twenty years in Sweden. An excep
tion is the most profitable sectors of industry. In addition, our investiga
tion points to a short-term correlation between investments and profitabili
ty.