Prologue

Abstract

The research, which forms the basis of this book, was motivated by a desire to understand one of the most controversial topics in economic history. Using new data, current financial models and financial theory from the 1920s, we reconstruct fundamental estimates of the values of US stocks and test for causes of the boom and bust. Our time frame of analysis centres on the 1915–33 period, but we use data over the very long term, from 1871 to 2010, to establish and resolve whether a ‘bubble’ — defined as a deviation from ex-post fundamental values — formed and then crashed.