Can Optimism about Technology Stocks Be Good for Welfare? Positive Spillovers vs. Equity Market Losses
This paper analyzes the impact of equity market information imperfections on R&D driven growth. The mechanism proposed is built on two premises. First, the R&D-sector relies largely on equity finance, because of its production features. Second, equity can be persistently mispriced. This is due to investors rationally taking into account both private and public information. This paper shows that optimism in equity market can generate long-run consumption gains, despite the excess capital losses realized in the short-run. This result arises from the externalities in R&D production that result in uderinvestment in R&D in a market economy with perfect information.
|Date of creation:||Apr 2009|
|Contact details of provider:|| Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1|
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
References listed on IDEAS
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.:
- Evangelia Vourvachaki, 2005.
"Information and Communication Technologies in a Multi-Sector Endogenous Growth Model,"
Money Macro and Finance (MMF) Research Group Conference 2005
10, Money Macro and Finance Research Group.
- Evangelia Vourvachaki, 2009. "Information and Communication Technologies in a Multi-sector Endogenous Growth Model," CERGE-EI Working Papers wp386, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
- Evangelia Vourvachaki, 2006. "Information and communication technologies in a multi-sector endogenous growth model," LSE Research Online Documents on Economics 19800, London School of Economics and Political Science, LSE Library.
- Evangelia Vourvachaki, 2006. "Information and Communication Technologies in a Multi-Sector Endogenous Growth Model," CEP Discussion Papers dp0750, Centre for Economic Performance, LSE.
- Ricardo J. Caballero & Emmanuel Farhi & Mohamad L. Hammour, 2006. "Speculative Growth: Hints from the U.S. Economy," American Economic Review, American Economic Association, vol. 96(4), pages 1159-1192, September.
- Ricardo Caballero & Emmanuel Farhi & Mohamad L. Hammour, 2004. "Speculative Growth: Hints from the US Economy," NBER Working Papers 10518, National Bureau of Economic Research, Inc.
- Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June.
- Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
- Comin, D. & Gertler, M., 2003. "Medium Term Business Cycles," Working Papers 03-05, C.V. Starr Center for Applied Economics, New York University.
- Carlin, Wendy & Mayer, Colin, 2003. "Finance, investment, and growth," Journal of Financial Economics, Elsevier, vol. 69(1), pages 191-226, July.
- Wendy Carlin & Colin Mayer, 1999. "Finance, Investment and Growth," OFRC Working Papers Series 1999fe09, Oxford Financial Research Centre.
- Carlin, Wendy & Mayer, Colin, 1999. "Finance, Investment and Growth," CEPR Discussion Papers 2233, C.E.P.R. Discussion Papers.
- Katrin Tinn, 2010. "Technology Adoption with Exit in Imperfectly Informed Equity Markets," American Economic Review, American Economic Association, vol. 100(3), pages 925-957, June.
- David M. Cutler & James M. Poterba & Lawrence H. Summers, 1991. "Speculative Dynamics," Review of Economic Studies, Oxford University Press, vol. 58(3), pages 529-546.
- David M. Cutler & James M. Poterba & Lawrence H. Summers, 1990. "Speculative Dynamics," NBER Working Papers 3242, National Bureau of Economic Research, Inc.
- Culter, D.M. & Poterba, J.M. & Summers, L.H., 1990. "Speculative Dynamics," Working papers 544, Massachusetts Institute of Technology (MIT), Department of Economics.
- Chan, Louis K C & Jegadeesh, Narasimhan & Lakonishok, Josef, 1996. " Momentum Strategies," Journal of Finance, American Finance Association, vol. 51(5), pages 1681-1713, December.
- Franklin Allen & Stephen Morris & Hyun Song Shin, 2006. "Beauty Contests and Iterated Expectations in Asset Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 719-752. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp383. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova)
If references are entirely missing, you can add them using this form.