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Equity prices, productivity growth and 'The New Economy'

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

  • Jakob B. Madsen
  • E. Philip Davis
The sharp increase in equity prices over the 1990s was widely attributed to permanently higher productivity growth derived from the New Economy. This article 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 data on productivity of R&D capital, patent capital and fixed capital for 11 OECD countries, empirical evidence gives strong support for the model by suggesting that technological innovations indeed have only temporary effects on equity returns
OriginalsprogEngelsk
TidsskriftEconomic Journal
Vol/bind116
Udgave nummer513
Sider (fra-til)791-811
ISSN0013-0133
DOI
StatusUdgivet - 2006

Bibliografisk note

JEL Classification: E44, G10, O33

ID: 314038