Equity Prices, Productivity Growth, And ‘The New Economy’
AbstractThe 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.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 03-04.
Length: 31 pages
Date of creation: Feb 2003
Date of revision:
Contact details of provider:
Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Jakob B Madsen & E Philip Davis, 2006. "Equity Prices, Productivity Growth and 'The New Economy'," Economic Journal, Royal Economic Society, vol. 116(513), pages 791-811, 07.
- Jakob B. Madsen & E. Philip Davis, 2004. "Equity Prices, Productivity Growth, and the 'New Economy'," EPRU Working Paper Series 04-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Jakob B Madsen & E Philip Davis, 2003. "Equity Prices, Productivity Growth, And ‘The New Economy’," Public Policy Discussion Papers 03-04, Economics and Finance Section, School of Social Sciences, Brunel University.
- Jakob B. Madsen & E. Philip Davis, 2004. "Equity Prices, Productivity Growth and 'The New Economy," FRU Working Papers 2004/11, University of Copenhagen. Department of Economics. Finance Research Unit.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G3 - Financial Economics - - Corporate Finance and Governance
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-18 (All new papers)
- NEP-FIN-2004-07-18 (Finance)
- NEP-FMK-2004-07-18 (Financial Markets)
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