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Bull and Bear Markets in the Twentieth Century

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  • Barsky, Robert B.
  • Long, J. Bradford De

Abstract

The major bull and bear markets of this century have suggested to many that large decade-to-decade stock market swings reflect irrational "fads and fashions" that periodically sweep investors. We argue instead that investors have perceived significant shifts in the long-run mean rate of future dividend growth. and that stock prices depend sufficiently sensitively on expectations about the underlying future growth rate that these perceived shifts would plausibly generate large swings like those of the twentieth century. We go on to document that analysts who have often been viewed as "smart money" held assessments of fundamental values based on their perceptions of future economic growth and technological progress: the judgments of these analysts, like the assessments of fundamentals we generate from simple dividend growth forecasting rules, track the major decade-to-decade swings in the market rather closely.

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Bibliographic Info

Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 50 (1990)
Issue (Month): 02 (June)
Pages: 265-281

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Handle: RePEc:cup:jechis:v:50:y:1990:i:02:p:265-281_03

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Cited by:
  1. Zeira, Joseph, 1993. "Informational Overshooting, Booms and Crashes," CEPR Discussion Papers 823, C.E.P.R. Discussion Papers.
  2. Barsky, Robert B & De Long, J Bradford, 1993. "Why Does the Stock Market Fluctuate?," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 291-311, May.
  3. Nathan S. Balke & Mark E. Wohar, 2001. "Low frequency movements in stock prices: a state space decomposition," Working Papers 0001, Federal Reserve Bank of Dallas.
  4. Filip Abraham & Hilde Leliaert, 1991. "Foreign dependence of individual stock prices: The role of aggregate product market developments," Open Economies Review, Springer, vol. 2(1), pages 1-26, February.
  5. Ahmed, Ehsan & Koppl, Roger & Rosser, J. Jr. & White, Mark V., 1997. "Complex bubble persistence in closed-end country funds," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 19-37, January.
  6. David Romer, 1992. "Rational Asset Price Movements Without News," NBER Working Papers 4121, National Bureau of Economic Research, Inc.
  7. J. Bradford De Long & Richard Grossman, 1992. "Excess Volatility on the London Stock Market, 1870-1990," J. Bradford De Long's Working Papers _133, University of California at Berkeley, Economics Department.
  8. Rappoport, Peter & White, Eugene N., 1993. "Was There a Bubble in the 1929 Stock Market?," The Journal of Economic History, Cambridge University Press, vol. 53(03), pages 549-574, September.
  9. Antonio Mele, 2004. "General properties of rational stock-market fluctuations," LSE Research Online Documents on Economics 24701, London School of Economics and Political Science, LSE Library.
  10. Candelon Bertrand & Metiu Norbert, 2009. "Testing for Exceptional Bulls and Bears: a Non-Parametric Perspective," Research Memorandum 017, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  11. J. Bradford De Long & Marco Becht, 1992. ""Excess Volatility" and the German Stock Market, 1876-1990," NBER Working Papers 4054, National Bureau of Economic Research, Inc.
  12. Michele Bagella & Rocco Ciciretti, 2009. "Financial markets and the post-crisis scenario," International Review of Economics, Springer, vol. 56(3), pages 215-225, September.
  13. J. Bradford De Long & Andrei Shleifer, . "The Stock Market Bubble of 1929: Evidence from Closed-End Funds," J. Bradford De Long's Working Papers _120, University of California at Berkeley, Economics Department.
  14. J. Bradford De Long & Marco Becht, 1995. ""Excess Volatility" and the German Stock Market, 1870-1990," Economic History 9509002, EconWPA.
  15. Kaliva, Kasimir & Koskinen, Lasse, 2008. "Stock market bubbles, inflation and investment risk," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 592-603, June.
  16. J. Bradford De Long & Andrei Shleifer, 1990. "The Bubble of 1929: Evidence from Closed-End Funds," NBER Working Papers 3523, National Bureau of Economic Research, Inc.

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