TY  - JOUR
AU  - Hobijn,Bart
AU  - Jovanovic,Boyan
TI  - The Information Technology Revolution and the Stock Market: Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7684
PY  - 2000
Y2  - May 2000
UR  - http://www.nber.org/papers/w7684
L1  - http://www.nber.org/papers/w7684.pdf
N1  - Author contact info:
Bart Hobijn
Federal Reserve Bank of San Francisco
Economic Research Department, Mailstop 1130
101 Market Street, 11th floor
San Francisco, CA 94105
Tel: 415 974 2314
Fax: 415 974 2168
E-Mail: bart.hobijn@sf.frb.org

Boyan Jovanovic
New York University
Department of Economics
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8953
Fax: 212/995-4186
E-Mail: Boyan.Jovanovic@nyu.edu
AB  - Since 1968, the ratio of stock market capitalization to GDP has varied by a factor of 5. In 1972, the ratio stood at above unity, but by 1974, it had fallen to 0.45 where it stayed for the next decade. It then began a steady climb, and today it stands above 2.   We argue that the IT revolution was behind this and, moreover, that the capitalization/GDP ratio is likely to decline and then rise after any major technological shift. The three assumptions that deliver the result are: 1. The IT revolution was anticipated by early 1973, 2. IT was resisted by incumbents, which led their value to fall, and 3. Takeovers are an imperfect policing device that allowed many firms to remain inefficient until the mid-1980's. We lay out some facts that the IT hypothesis explains, but that some alternative hypotheses -- oil-price shocks, increased market volatility, and bubbles -- do not.
ER  -