The Stock Market Crash of 1929: Irving Fisher Was Right!
AbstractIn the fall of 1929, the market value of all shares listed on the New York Stock Exchange fell by 30 percent. Many analysts then and now take the view that stocks were then overvalued and the stock market was in need of a correction. Irving Fisher argued that the fundamentals were strong and the stock market was undervalued. In this paper, we estimate the fundamental value of corporate equity in 1929 using data on stocks of productive capital and tax rates as in McGrattan and Prescott (2000, 2001) and compare it to actual stock valuations. We find that the stock market in 1929 did not crash because the market was overvalued. In fact, the evidence strongly suggests that stocks were undervalued, even at their 1929 peak.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8622.
Date of creation: Dec 2001
Date of revision:
Publication status: published as McGrattan, Ellen R. and E. Prescott. “The 1929 Stock Market: Irving Fisher Was Right." International Economic Review 45 (2004): 991–1009.
Note: AP EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-12-04 (All new papers)
- NEP-DGE-2001-12-04 (Dynamic General Equilibrium)
- NEP-FMK-2001-12-04 (Financial Markets)
- NEP-LAM-2001-12-04 (Central & South America)
- NEP-PKE-2001-12-04 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boyan Jovanovic & Peter L. Rousseau, 2001.
"Liquidity Effects in the Bond Market,"
NBER Working Papers
8597, National Bureau of Economic Research, Inc.
- Boyan Jovanovic & Peter L. Rousseau, 2001. "Liquidity Effects in the Bond Market," Vanderbilt University Department of Economics Working Papers 0117, Vanderbilt University Department of Economics.
- Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
- Hamilton, James D. & Whiteman, Charles H., 1985. "The observable implications of self-fulfilling expectations," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 353-373, November.
- Flood, Robert P & Hodrick, Robert J, 1990. "On Testing for Speculative Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 85-101, Spring.
- Claudio E. V. Borio & Wiliam English & Andrew Filardo, 2003.
"A tale of two perspectives: old or new challenges for monetary policy?,"
BIS Working Papers
127, Bank for International Settlements.
- Claudio Borio & William English & Andrew Filardo, 2003. "A tale of two perspectives: old or new challenges for monetary policy?," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 1-59 Bank for International Settlements.
- Thomas F Helbling, 2005. "Housing price bubbles - a tale based on housing price booms and busts," BIS Papers chapters, in: Bank for International Settlements (ed.), Real estate indicators and financial stability, volume 21, pages 30-41 Bank for International Settlements.
- Barry Eichengreen & Kris Mitchener, 2003. "The Great Depression as a credit boom gone wrong," BIS Working Papers 137, Bank for International Settlements.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.