The purpose of this paper is to test a theory of investment behavior based on the neoclassical theory of optimal capital accumulation. This theory of investment behavior determines the demand for capital services, the relationship between changes in demand and actual investment expenditures, and investment for replacement purposes. Investment functions based on the theory are fitted to data for fifteen sub-industries for manufacturing in the United States for the period 1947-1960 and groupings of these industries into total durables, total nondurables, and total manufacturing. The empirical results provide new evidence on the relationship of determinants of investment expenditures to instruments of economic policy. These results suggest an important role for the tax structure and the cost of capital in the determination of investment expenditures. Investment functions for groupings of the sub-industries are tested for the presence of errors of aggregation. The use of such aggregates results in substantial errors of aggregation.