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Financing Innovation in the United States, 1870 to the Present$
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Naomi R Lamoreaux and Kenneth L Sokoloff

Print publication date: 2007

Print ISBN-13: 9780262122894

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262122894.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 26 July 2021

Stock Market Swings and the Value of Innovation, 1908–1929

Stock Market Swings and the Value of Innovation, 1908–1929

Chapter:
(p.217) 5 Stock Market Swings and the Value of Innovation, 1908–1929
Source:
Financing Innovation in the United States, 1870 to the Present
Author(s):

Tom Nicholas

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262122894.003.0006

This chapter explores the effect of stock market swings and the economics of financial markets. Using over twenty years of data prior to the Great Crash, the chapter takes a look at firm-level innovation during the event of major swings in financial markets. These swings are then correlated with possible changes in investor forecasts on the value of fundamentals. The study reveals that intangible capital created a shift in investor psychology during the 1920s and thus investors were more responsive, hence encouraging the growth of the stock market and creating large stock market payoffs for innovation. Technological change is thus concluded to trigger boom in the stock market, and that the 1920s stock market boom can be viewed as investors’ response to the growth of intangibles.

Keywords:   stock market swings, economics of financial markets, Great Crash, firm-level innovation, major swings, value of fundamentals, intangible capital, investor psychology

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