The information-technology revolution and the stock market

Evidence

Bart Hobijn, Boyan Jovanovic

Research output: Contribution to journalArticle

105 Citations (Scopus)

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
StatePublished - Dec 2001
Externally publishedYes

Fingerprint

Stock market
Investors
Incumbents
New firms
Stock prices
Lag

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

The information-technology revolution and the stock market : Evidence. / Hobijn, Bart; Jovanovic, Boyan.

In: American Economic Review, Vol. 91, No. 5, 12.2001, p. 1203-1220.

Research output: Contribution to journalArticle

@article{a65294b658cf4c41b6a485d34511e150,
title = "The information-technology revolution and the stock market: Evidence",
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).",
author = "Bart Hobijn and Boyan Jovanovic",
year = "2001",
month = "12",
language = "English (US)",
volume = "91",
pages = "1203--1220",
journal = "American Economic Review",
issn = "0002-8282",
publisher = "American Economic Association",
number = "5",

}

TY - JOUR

T1 - The information-technology revolution and the stock market

T2 - Evidence

AU - Hobijn, Bart

AU - Jovanovic, Boyan

PY - 2001/12

Y1 - 2001/12

N2 - 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).

AB - 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).

UR - http://www.scopus.com/inward/record.url?scp=0001520309&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0001520309&partnerID=8YFLogxK

M3 - Article

VL - 91

SP - 1203

EP - 1220

JO - American Economic Review

JF - American Economic Review

SN - 0002-8282

IS - 5

ER -