The it Revolution and the Stock Market

17 Pages Posted: 9 Mar 1999 Last revised: 5 May 2000

See all articles by Jeremy Greenwood

Jeremy Greenwood

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Boyan Jovanovic

New York University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 1999

Abstract

A new technology or product is often developed by the single entrepreneur. Whether he reaches the public offering stage or is acquired by a listed firm it takes time for the innovator to add value to the stock market. Indeed first, reduce the market's value because some firms -- usually large or old -- will cling to old technologies that have lost their momentum. This paper argue that (a) the market declined in the late 1960s because it felt that the old technologies either had lost their momentum or would give way to IT, and that (b) IT innovators boosted the stock market's value only in the 1980s. If the stock market provides a forecast of future events, then the recent dramatic upswing represents a rosy estimate about growth in future profits for the economy. This translates into a forecast of higher output and productivity growth, holding other things equal (such as capital's share of income).

Suggested Citation

Greenwood, Jeremy and Jovanovic, Boyan, The it Revolution and the Stock Market (February 1999). NBER Working Paper No. w6931. Available at SSRN: https://ssrn.com/abstract=149638

Jeremy Greenwood

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
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215-898-1505 (Phone)

HOME PAGE: http://jeremygreenwood.net

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

19 w 4 st.
New York, NY 10012
United States

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