I have to agree with Alex Bryan. Here is a graph of the S&P 500
http://finance.yahoo.com/q?s=^SPX&d=c&t=5y&l=on&z=b&q=l
About a third of the drop occurred before 9/11, a third occurred immediately after
9/11, and the other 2/3rds occurred in the first half of last year. Why 4/3rds?
Because most of the drop after 9/11 was recovered over the next few months. But this
is silly anyway.
1) I challenge anyone to explain what 9/11 told us that we didn't already know that
would explain something on the order of a 40% drop in the rational valuation of the US
capital stock!
2) For that matter, what combination of events could have provided information that
would lead one to conclude that the PV of future income streams would be 40% lower in
July of last year than it was thought to be in July of 2000? It was a bubble.
Financial markets aren't fully efficient. Live with it. ;-} - - Bill
William T. Dickens
The Brookings Institution
1775 Massachusetts Avenue, NW
Washington, DC 20036
Phone: (202) 797-6113
FAX: (202) 797-6181
E-MAIL: [EMAIL PROTECTED]
AOL IM: wtdickens
>>> [EMAIL PROTECTED] 01/24/03 02:24PM >>>
Alex T Tabarrok wrote:
>
> Bryan D Caplan wrote:
>
> >Another annoying thing about the "I told you there was a bubble" people
> >is that a good chunk of the stock market crash can be attributed to the
> >9/11 attacks (more specifically, indirect effects via policy changes).
> >If ever there were a random shock, it was 9/11.
> >
> >
> Shame on Bryan for asserting such a falsehood. Here is a graph of the
> Nasdaq market. It is very clear that the crash happened well before
> 9/11.
Gee, Alex, I said "a good chunk," not all, or even 50%. And your graph
is of the Nasdaq rather than the broad market, and shows absolute levels
rather than percent changes.
--
Prof. Bryan Caplan
Department of Economics George Mason University
http://www.bcaplan.com [EMAIL PROTECTED]
"He wrote a letter, but did not post it because he felt that no one
would have understood what he wanted to say, and besides it was not
necessary that anyone but himself should understand it."
Leo Tolstoy, *The Cossacks*
