Technology and the Stock Market: 1885-1998

Working Paper No. 00-W42

Boyan Jovanovic and Peter L. Rousseau

ABSTRACT [article]

Using 114 years of U.S. stock market data we try to relate movements in stock prices to changes in technology. We find

• Measures of technological progress explain 37\% of the 3.9\% annual growth in the stock market over the 1885-1998 period,
  
  
• The "Jazz-Age" (1918-1934) entrants were not overvalued, in spite of the 1929 crash and the Great Depression, and
  
  
• The large shift to stocks and away from debt finance over the entire period does not explain the medium and short frequency movements in stock-market capitalization.

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