Equity Prices, Productivity Growth, and ‘the New Economy’
نویسندگان
چکیده
The increase in equity prices over the 1990s has to a large degree been attributed to permanently higher productivity growth that is derived from the ‘new economy’ and related research and development (R&D) expenditures. This paper establishes a rational expectations model of technology innovations and equity prices, which shows that under plausible assumptions, productivity advances can only have temporary effects on fundamentals of equity prices. Using data on R&D capital and fixed capital productivity for 11 OECD countries, the evidence give strong support for the model by suggesting that technology innovations indeed have only temporary effects on equity returns. JEL Classification: G120, G3, O4
منابع مشابه
EPRU Working Paper Series
The sharp increase in equity prices over the 1990s was widely attributed to permanently higher productivity growth derived from the New Economy. This paper establishes a rational expectations model of technology innovations and equity prices, which shows that under plausible assumptions, productivity advances can only have temporary effects on the fundamentals of equity prices. Using historical...
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