The Stock Market and Investment in the New Economy: Some Tangible Facts and Intangible Fictions

Jason G. Cummins and

JGC

Jason G. Cummins New York University

Stephen R. Bond

SRB

Stephen R. Bond Institute for Fiscal Studies, London

Discussants: Janice C. Eberly and

Janice C. Eberly Nonresident Senior Fellow - Economic Studies

Robert J. Shiller

Robert J. Shiller Sterling Professor of Economics - Yale University

BROADLY SPEAKING, there are two opposing views about the relationship
between the stock market and the new economy. In one view, expressed
in the quotation from Vice President Gore, intangible investment helps
explain why companies’ market values are so much greater than the values
of their tangible assets. In the other view, expressed, ironically, by the
president of one of the leading firms in the new economy, stock market valuations have become unhinged from company fundamentals. Whatever
the motivations of Gore and Ballmer in making these comments, their perspectives
frame the debate about the relationship between the stock market
and the new economy.