Tuesday, December 29, 2009

The Stock Market Crash and the Real Economy

James Hamilton has an interesting post on the “lost decade for stocks” (Econbrowser, December 26) here .

The boom and bust episode, exceptional by historical standards, is quite apparent in the Price/Earnings series, here:

And it is well explained by the evolution of real earnings, here:

My comment: the market exuberance was not that irrational after all, nor was the crash.

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