NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bubbles and Busts: The 1990s in the Mirror of the 1920s

Eugene N. White

NBER Working Paper No. 12138
Issued in April 2006
NBER Program(s):   AP   DAE   ME

This paper surveys the twentieth century booms and crashes in the American stock market, focusing on a comparison of the two most similar events in the 1920s and 1990s. In both booms, claims were made that they were the consequence a “new economy” or “irrational exuberance.” Neither boom can be readily explained by fundamentals, represented by expected dividend growth or changes in the equity premium. The difficulty of identifying the fundamentals implies that central banks would not be successful in preventing pre-emptive policies, although they still would have a critical role to play in preventing crashes from disrupting the payments system or sparking an intermediation crisis.

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Document Object Identifier (DOI): 10.3386/w12138

Published: White, Eugene. “Bubbles and Busts: The great bull markets of the 1920s and 1930s,” Financial History 89 (Fall 2007): 12-15, 27.

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