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New Economy Stock Valuations and Investmen in the 1990's

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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: 17
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/78

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Related research

Keywords: Stock markets; stock market; stock market capitalization; stock valuations; stock prices; capital formation; international financial statistics; stock price; financial system; stock market volatility; stock valuation; consumer price index; financial systems; stock market index; bond; call money; bond markets; money market; financial markets; equity market; access to bond markets; stock price index; financial economics; capital stock; stock market developments; capital theory; asset markets; stock market prices;

References

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  1. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
  3. Singh, Ajit & Singh, Alaka & Wiesse, Bruce, 2000. "Information technology, venture capital and the stock market," MPRA Paper 53718, University Library of Munich, Germany.
  4. Poterba, James M. & Summers, Lawrence H., 1988. "Mean reversion in stock prices : Evidence and Implications," Journal of Financial Economics, Elsevier, Elsevier, vol. 22(1), pages 27-59, October.
  5. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
  6. Barro, Robert J, 1990. "The Stock Market and Investment," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 3(1), pages 115-31.
  7. Galeotti, Marzio & Schiantarelli, Fabio, 1990. "Stock Market Volatility And Investment: Do Only Fundamental Matter?," Working Papers, C.V. Starr Center for Applied Economics, New York University 90-15, C.V. Starr Center for Applied Economics, New York University.
  8. Torsten Sløk & Hali J. Edison, 2001. "Wealth Effects and the New Economy," IMF Working Papers 01/77, International Monetary Fund.
  9. Zuliu Hu, 1995. "Stock Market Volatility and Corporate Investment," IMF Working Papers 95/102, 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. Laurent Clerk & Christian Pfister, 2003. "The role of financial factors in the transmission of monetary policy," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 192-212 Bank for International Settlements.
  3. Guy Meredith, 2001. "Why Has the Euro Been so Weak?," IMF Working Papers 01/155, International Monetary Fund.

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