The 1929 stock market: Irving fisher was right

Ellen R. McGrattan, Edward Prescott

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)991-1009
Number of pages19
JournalInternational Economic Review
Volume45
Issue number4
DOIs
StatePublished - Nov 2004

Fingerprint

Stock market
Crash
Analysts
Income
Growth theory
Prediction
Intangibles
Fundamental values
Tax rate
Equity

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

The 1929 stock market : Irving fisher was right. / McGrattan, Ellen R.; Prescott, Edward.

In: International Economic Review, Vol. 45, No. 4, 11.2004, p. 991-1009.

Research output: Contribution to journalArticle

McGrattan, Ellen R. ; Prescott, Edward. / The 1929 stock market : Irving fisher was right. In: International Economic Review. 2004 ; Vol. 45, No. 4. pp. 991-1009.
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