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Title: Equity prices, productivity growth and the "new economy"
Authors: Madsen, J
Davis, EP
Keywords: New economy, productivity, economic growth, and equity prices.
Issue Date: 2003
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 03-04
Abstract: The increase in equity prices over the 1990s has to a large degree been attributed to permanently higher productivity growth that is derived from the ‘new economy’ and related research and development (R&D) expenditures. This paper establishes a rational expectations model of technology innovations and equity prices, which shows that under plausible assumptions, productivity advances can only have temporary effects on fundamentals of equity prices. Using data on R&D capital and fixed capital productivity for 11 OECD countries, the evidence give strong support for the model by suggesting that technology innovations indeed have only temporary effects on equity returns
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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