Alternative hypothesis: sentiment and cost of capital.

Note: This table presents the results on whether the investment of financially constrained (private) firms is more sensitive to the noise in the industry valuation. The dependent variable is Capx/K, which is capital expenditures scaled by the beginning-of-period capital. The noise measure in columns 1, 3, and 5 is $Minor_Industry_qi,t−1$⁠, and in columns 2, 4, and 6 is $Minor_PurePlay_qi,t−1$⁠. For each specification, I interact the noise with a financial constraint dummy, where financial constraint is classified by size, dividend payout, and the Whited–Wu Index, respectively. All specifications control for the FC dummy, the component of the industry valuation that relates to the major-segment industry, $Major_q¯$⁠, its interaction with the FC dummy, as well as the full set of firm and industry controls. I control for minor-segment industry characteristics by operating a similar decomposition for the industry characteristics. All variable constructions are described in  Appendix A. All regression models are estimated with firm-fixed effects and year-fixed effects. t-statistics in parentheses are adjusted allowing within industry clusters. Coefficients significant at the 10 percent, 5 percent, and 1 percent levels are marked with *, **, and ***, respectively.