Such consummate masters of the bourse as J. P. Morgan the elder and Bernard Baruch insisted that there was no formula leading to prophesying of share-price movements. Morgan was willing to say no more of the market than that it would fluctuate. Baruch said that there was no analytical key to the market; he claimed to have developed his feel for the market from study of the madness of crowds. The successors to Morgan and Baruch are no less guarded. And academic authorities claim that data generated by share markets support the hypothesis that no predictive formula can be expected to be successful.
KeywordsInterest Rate Federal Reserve Share Price Retention Ratio Random Shock
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- 1.Cf. M. L. Burstein, ‘Monetary Policy, the Stock Market and the Real Economy: A Keynesian Conspectus’, in Michael Allingham and M. L. Burstein (eds.), Resource Allocation and Economic Policy ( London: Macmillan; 1996 ), pp. 153–63.Google Scholar
- 2.Franco Modigliani and Merton Miller, ‘The Cost of Capital, Corporation Finance and Theory of Investment’, American Economic Review (48), June 1958, pp. 261–97.Google Scholar
- A good starting point in this field is Myron J. Gordon, The Investment, Financing and Valuation of the Corporation (Homewood, Ill.: Richard D. Irwin, Inc.; 1962 ). Gordon’s book, a bit dated now, is notably direct and succinct.Google Scholar