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The stock market bubble of 1929: evidence from clsoed-end mutual funds

Published online by Cambridge University Press:  03 March 2009

J. Bradford De Long  and
Andrei Shleifer
J. Bradford De Long
Affiliation:
Assistant Profeesor of Economics
Andrei Shleifer
Affiliation:
professor of Economics at Harvard Univeristy, Cambridge, MA 02138.
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Abstract

Economists directly observe warranted “fundamental” values in only a few cases. One is that of closed-end mutual funds: their fundamental value is simply the current market value of the securities that make up their portfolios. We use the difference between prices and net asset values of closed-end mutual funds at the end of the 1920s to estimate the degree to which the stock market was overvalued on the eve of the 1929 crash. We conclude that the stocks making up the S & P composite were priced at least 30 percent above fundamentals in late summer, 1929.

Type
Articles
Information
The Journal of Economic History , Volume 51 , Issue 3 , September 1991 , pp. 675 - 700
Copyright
Copyright © The Economic History Association 1991

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References

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