The Bubble of 1929: Evidence from Closed-End Funds / J. Bradford De Long, Andrei Shleifer.

Format:

Book

Author/Creator:

De Long, J. Bradford.

Contributor:

National Bureau of Economic Research.

Shleifer, Andrei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3523.

NBER working paper series no. w3523

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Bubble of 1929

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Summary:

Closed-end mutual funds provide one of the few cases in which economists can observe "fundamental" values directly, and compare them to market values: the fundamental value of a closed-end fund is simply the net asset value of its portfolio. We use the difference between prices and asset values of closed-end funds at the end of the 1920s as a measure of investment sentiment. In the late l920s closed-end funds sold at large premia: at the peak, they appear willing to pay 60 percent more for closed-end funds than the post-WWII norm. Such substantial overpricing of closed-end funds -- where fundamentals are known and observed -- suggests that other assets were selling at prices above fundamentals as well. The association between movements in the medium closed-end fund discount and movements in broad stock price indices leads us to conclude that the stocks making up the S & P composite were priced at least 30 percent above fundamentals in the summer of 1929.

Notes:

Print version record

November 1990.