The information-technology revolution and the stock market

Evidence

Bart Hobijn, Boyan Jovanovic

    Research output: Contribution to journalArticle

    Abstract

    Why did the stock market decline so much in the early 1970's and remain low until the early 1980's? We argue that it was because information technology arrived on the scene and the stock-market incumbents of the day were not ready to implement it. Instead, new firms would bring in the new technology after the mid-1980's. Investors foresaw this in the early 1970's and stock prices fell right away. In our model, new capital destroys old capital, but with a lag. The prospect of this causes the value of the old capital to fall right away. (JEL G12, O16, O33).

    Original languageEnglish (US)
    Pages (from-to)1203-1220
    Number of pages18
    JournalAmerican Economic Review
    Volume91
    Issue number5
    StatePublished - Dec 2001

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    Stock market
    Investors
    Incumbents
    New firms
    Stock prices
    Lag

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    The information-technology revolution and the stock market : Evidence. / Hobijn, Bart; Jovanovic, Boyan.

    In: American Economic Review, Vol. 91, No. 5, 12.2001, p. 1203-1220.

    Research output: Contribution to journalArticle

    Hobijn, B & Jovanovic, B 2001, 'The information-technology revolution and the stock market: Evidence', American Economic Review, vol. 91, no. 5, pp. 1203-1220.
    Hobijn, Bart ; Jovanovic, Boyan. / The information-technology revolution and the stock market : Evidence. In: American Economic Review. 2001 ; Vol. 91, No. 5. pp. 1203-1220.
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