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The IT Revolution and the Stock Market

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Author Info

  • Greenwood, J.
  • Jovanovic, B.

Abstract

A new technology or product is often developed by the single entrepreneur. Whether he reaches the initial public offering stage or is acquired by a listed firm, it takes time for the innovator to add value to the stock market. Indeed, the innovation may, at 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 argues 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).

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Bibliographic Info

Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 99-02.

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Length: 15 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:cvs:starer:99-02

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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
Phone: (212) 998-8936
Fax: (212) 995-3932
Email:
Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
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Related research

Keywords: INFORMATION TECHNOLOGY ; STOCK MARKET;

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  1. Organizational failure
    by chris dillow in Stumbling and Mumbling on 2011-08-03 13:02:48

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