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  • September 2008
  • Article
  • American Economic Review

Does Innovation Cause Stock Market Runups? Evidence from the Great Crash

By: Tom Nicholas
  • Format:Print
  • | Pages:27
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Abstract

This article examines the stock market's changing valuation of corporate patentable assets between 1910 and 1939. It shows that the value of knowledge capital increased significantly during the 1920s compared to the 1910s as investors responded to the quality of technological inventions. Innovation was an important driver of the late 1920s stock market runup and the Great Crash did not reflect a significant revaluation of knowledge capital relative to physical capital. Although substantial quantities of influential patents were accumulated during the post-crash recovery, high technology firms did not earn significant excess returns over low technology firms for most of the 1930s.

Keywords

History; Technological Innovation; Patents; Stocks; Valuation; Financial Crisis; Financial Services Industry; United States

Citation

Nicholas, Tom. "Does Innovation Cause Stock Market Runups? Evidence from the Great Crash." American Economic Review 98, no. 4 (September 2008): 1370–1396.
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About The Author

Tom Nicholas

Entrepreneurial Management
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More from the Author
  • Human Capital and the Managerial Revolution in the United States By: Tom Nicholas
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  • A Soul and a Service: North Carolina Mutual Life Insurance By: Tom Nicholas and John Masko
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