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The IT Revolution and the Stock Market

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  • Jeremy Greenwood
  • Boyan Jovanovic

Abstract

A new technology or product is often developed by the single entrepreneur. Whether he reaches the public offering stage or is acquired by a listed firm it takes time for the innovator to add value to the stock market. Indeed first, reduce the market's value because some firms -- usually large or old -- will cling to old technologies that have lost their momentum. This paper argue that (a) the market declined in the late 1960s because it felt that the old technologies either had lost their momentum or would give way to IT, and that (b) IT innovators boosted the stock market's value only in the 1980s. If the stock market provides a forecast of future events, then the recent dramatic upswing represents a rosy estimate about growth in future profits for the economy. This translates into a forecast of higher output and productivity growth, holding other things equal (such as capital's share of income).

Suggested Citation

  • Jeremy Greenwood & Boyan Jovanovic, 1999. "The IT Revolution and the Stock Market," NBER Working Papers 6931, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6931
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • G1 - Financial Economics - - General Financial Markets

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