Technology and the Stock Market: 1885-1998

Abstract

Using 114 years of U.S. stock market data we try to relate movements in stock prices to changes in technology. We find Measures of technological progress explain 37% of the 3.9% annual growth in the stock market over the 1885-1998 period, The "Jazz-Age" (1918-1934) entrants were not overvalued, in spite of the 1929 crash and the Great Depression, and The large shift to stocks and away from debt finance over the entire period does not explain the medium and short frequency movements in stock-market capitalization.