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New Economy Stock Valuations and Investmen in the 1990s

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  • Torsten Sløk
  • Hali J. Edison

Abstract

This paper investigates whether there is a different impact from changes in 'new' and 'old' economy stock valuations on private investment for seven OECD economies. A vector autoregressive model is estimated for each individual country, using quarterly data over the period 1990-2000. We find that the impact from changes in valuations of new economy stocks to investment is roughly the same in North America and United Kingdom as in continental Europe. By contrast, the impact from changes in old economy stock valuations on investment is, in general, larger in North America and United Kingdom than in continental Europe. Finally, the results suggest that in continental Europe the impact on investment from changes in the valuation of new economy stocks is bigger than for old economy stocks, whereas for North America and United Kingdom the impact is more similar.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/78.

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Length: 23
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/78

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Related research

Keywords: Stock markets;

References

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  1. Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
  2. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June.
  3. Galeotti, Marzio & Schiantarelli, Fabio, 1990. "Stock Market Volatility And Investment: Do Only Fundamental Matter?," Working Papers 90-15, C.V. Starr Center for Applied Economics, New York University.
  4. Zuliu Hu, 1995. "Stock Market Volatility and Corporate Investment," IMF Working Papers 95/102, International Monetary Fund.
  5. Barro, Robert J, 1990. "The Stock Market and Investment," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 115-31.
  6. Poterba, James M. & Summers, Lawrence H., 1988. "Mean reversion in stock prices : Evidence and Implications," Journal of Financial Economics, Elsevier, vol. 22(1), pages 27-59, October.
  7. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Singh, Ajit & Singh, Alaka & Wiess, Bruce, 2000. "Information Technology, Venture Capital and the Stock Market," Accounting and Finance Discussion Papers 00-af47, Faculty of Economics, University of Cambridge.
  9. Torsten Sløk & Hali J. Edison, 2001. "Wealth Effects and the New Economy," IMF Working Papers 01/77, International Monetary Fund.
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Cited by:
  1. Torsten Sløk & Hali J. Edison, 2001. "Wealth Effects and the New Economy," IMF Working Papers 01/77, International Monetary Fund.
  2. Guy Meredith, 2001. "Why Has the Euro Been So Weak?," IMF Working Papers 01/155, International Monetary Fund.
  3. Laurent Clerk & Christian Pfister, 2003. "The role of financial factors in the transmission of monetary policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 192-212 Bank for International Settlements.

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