TY  - JOUR
AU  - Barsky,Robert B.
AU  - Long,J. Bradford De
TI  - Why Does the Stock Market Fluctuate?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3995
PY  - 1992
Y2  - February 1992
UR  - http://www.nber.org/papers/w3995
L1  - http://www.nber.org/papers/w3995.pdf
N1  - Author contact info:
Robert B. Barsky
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/764-9476
Fax: 734/764-2769
E-Mail: barsky@umich.edu

J. Bradford DeLong
Department of Economics
601 Evans Hall
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-4027
Fax: 510/642-6615
E-Mail: delong@econ.berkeley.edu
M2  - featured in NBER digest on 1992-06-01
AB  - Large long-run swings in the United States stock market over the past century correspond to swings in estimates of fundamental values calculated by using a long moving average of past dividend growth to forecast future growth rates. Such a procedure would have been reasonable if investors were uncertain of the structure of the economy. and had to make forecasts of unknown and possibly-changing long-run dividend growth rates. The parameters of the stochastic process followed by dividends over the twentieth century cannot be precisely estimated even today at the century's end. Investors in the past had even less information about the dividend process. In such a context, it is difficult to see how investors can be faulted for implicitly forecasting future dividends by extrapolating past dividend growth.
ER  -