New Economy Stock Valuations and Investmen in the 1990's

Abstract

This paper investigates whether there is a different impact from changes in "new" and "old" economy stock valuations on private investment for seven OECD economies. A vector autoregressive model is estimated for each individual country, using quarterly data over the period 1990-2000. We find that the impact from changes in valuations of new economy stocks to investment is roughly the same in North America and United Kingdom as in continental Europe. By contrast, the impact from changes in old economy stock valuations on investment is, in general, larger in North America and United Kingdom than in continental Europe. Finally, the results suggest that in continental Europe the impact on investment from changes in the valuation of new economy stocks is bigger than for old economy stocks, whereas for North America and United Kingdom the impact is more similar.Stock markets;stock market, stock market capitalization, stock valuations, stock prices, capital formation, international financial statistics, stock price, financial system, stock market volatility, stock valuation, consumer price index, financial systems, stock market index, bond, call money, bond markets, money market, financial markets, equity market, access to bond markets, stock price index, financial economics, capital stock, stock market developments, capital theory, asset markets, stock market prices