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|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
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.:
- Colin Mayer & Wendy Carlin, 1999.
"Finance, Investment and Growth,"
Economics Series Working Papers
1999-FE-09, University of Oxford, Department of Economics.
- Culter, D.M. & Poterba, J.M. & Summers, L.H., 1990.
544, Massachusetts Institute of Technology (MIT), Department of Economics.
- Evangelia Vourvachaki, 2006.
"Information and Communication Technologies in a Multi-Sector Endogenous Growth Model,"
CEP Discussion Papers
dp0750, Centre for Economic Performance, LSE.
- 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, 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.
- Diego Comin & Mark Gertler, 2003.
"Medium Term Business Cycles,"
NBER Working Papers
10003, National Bureau of Economic Research, Inc.
- Katrin Tinn, 2010. "Technology Adoption with Exit in Imperfectly Informed Equity Markets," American Economic Review, American Economic Association, vol. 100(3), pages 925-57, June.
- 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.
- Chan, Louis K C & Jegadeesh, Narasimhan & Lakonishok, Josef, 1996. " Momentum Strategies," Journal of Finance, American Finance Association, vol. 51(5), pages 1681-1713, December.
- 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.
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.