The information-technology revolution and the stock market: Evidence

Bart Hobijn, Boyan Jovanovic

Research output: Contribution to journalArticlepeer-review

115 Scopus citations

Abstract

Why did the stock market decline so much in the early 1970's and remain low until the early 1980's? We argue that it was because information technology arrived on the scene and the stock-market incumbents of the day were not ready to implement it. Instead, new firms would bring in the new technology after the mid-1980's. Investors foresaw this in the early 1970's and stock prices fell right away. In our model, new capital destroys old capital, but with a lag. The prospect of this causes the value of the old capital to fall right away. (JEL G12, O16, O33).

Original languageEnglish (US)
Pages (from-to)1203-1220
Number of pages18
JournalAmerican Economic Review
Volume91
Issue number5
DOIs
StatePublished - Dec 2001

ASJC Scopus subject areas

  • Economics and Econometrics

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