TY - JOUR
T1 - The 1929 stock market
T2 - Irving fisher was right
AU - McGrattan, Ellen R.
AU - Prescott, Edward
PY - 2004/11
Y1 - 2004/11
N2 - Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued. Irving Fisher argued just before the crash that fundamentals were strong and the stock market was undervalued. In this article, we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations. Our estimate is based on values of productive corporate capital, both tangible and intangible, and tax rates on corporate income and distributions. The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were undervalued relative to the prediction of theory.
AB - Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued. Irving Fisher argued just before the crash that fundamentals were strong and the stock market was undervalued. In this article, we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations. Our estimate is based on values of productive corporate capital, both tangible and intangible, and tax rates on corporate income and distributions. The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were undervalued relative to the prediction of theory.
UR - http://www.scopus.com/inward/record.url?scp=10044240402&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=10044240402&partnerID=8YFLogxK
U2 - 10.1111/j.0020-6598.2004.00295.x
DO - 10.1111/j.0020-6598.2004.00295.x
M3 - Article
AN - SCOPUS:10044240402
SN - 0020-6598
VL - 45
SP - 991
EP - 1009
JO - International Economic Review
JF - International Economic Review
IS - 4
ER -