Technological Revolutions and Stock Prices
Year: 2009
Type: article
Abstract: We develop a general equilibrium model in which stock prices of innovative firms exhibit “bubbles” during technological revolutions. In the model, the average productivity of a new technology is uncertain and subject to learning. During technological revolutions, the nature of this uncertainty changes from idiosyncratic to systematic. The resulting bubbles in stock prices are observable ex post but unpredictable ex ante, and they are most pronounced for technologies characterized by high uncertainty and fast adoption. We find empirical support for the model's predictions in 1830–1861 and 1992–2005 when the railroad and Internet technologies spread in the United States. (JEL G12, L86, L92, N21, N22, N71, N72)
Source: American Economic Review
Authors: Ľuboš Pástor, Pietro Veronesi
Institution: University of Chicago
Language: English
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121865372