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Learning From Stock Prices and Economic Growth

  • Peress, Joël

A competitive stock market is embedded into a neoclassical growth economy to analyze the interplay between the acquisition of information about firms, its partial revelation through stock prices, capital allocation and income. The stock market allows investors to share their costly private signals in a cost-effective incentive-compatible way. It contributes to economic growth by raising total factor productivity, but its impact is only transitory. Several predictions on the evolution of real and financial variables are derived, including capital efficiency, total factor productivity, industrial specialization, wealth inequality, stock trading intensity, liquidity and return volatility.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8569.

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Date of creation: Sep 2011
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Handle: RePEc:cpr:ceprdp:8569
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  1. Colin Mayer & Wendy Carlin, 1999. "Finance, Investment and Growth," Economics Series Working Papers 1999-FE-09, University of Oxford, Department of Economics.
  2. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  3. Sørensen, Bent E & Yosha, Oved, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," CEPR Discussion Papers 2295, C.E.P.R. Discussion Papers.
  4. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2002. "Distance to Frontier, Selection, and Economic Growth," NBER Working Papers 9066, National Bureau of Economic Research, Inc.
  5. John Y. Campbell & Martin Lettau & Burton G. Malkiel & Yexiao Xu, 2000. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," NBER Working Papers 7590, National Bureau of Economic Research, Inc.
  6. Joel Peress, 2010. "Product Market Competition, Insider Trading, and Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 65(1), pages 1-43, 02.
  7. Peter L. Rousseau & Paul Wachtel, 1998. "Equity Markets and Growth: Cross-Country Evidence on Timing and Outcomes, 1980-1995," Working Papers 98-09, New York University, Leonard N. Stern School of Business, Department of Economics.
  8. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2009. "Financial Openness and Productivity," NBER Working Papers 14843, National Bureau of Economic Research, Inc.
  9. Zeira, Joseph, 1994. "Informational Cycles," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 31-44, January.
  10. James R. Brown & Steven M. Fazzari & Bruce C. Petersen, 2009. "Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom," Journal of Finance, American Finance Association, vol. 64(1), pages 151-185, 02.
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