Oil crisis, Energy Saving Technological Change, and the Stock Market Collapse of 1974

Adrian Peralta-Alva () and Sami Alpanda
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Sami Alpanda: Amherst College

No 49, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: The market value of U.S. corporations was nearly halved following the oil crisis of October 1973. Real energy prices more than doubled by the end of the decade, increasing energy costs and spurring innovation in energy-saving technologies by corporations. This paper uses a neoclassical growth model to quantify the impact of the increase in energy prices on the market value of U.S. corporations. In the model, corporations adopt energy-saving technologies as a response to the energy price shock and the price of installed capital falls due to investment irreversibility. The model calibrated to match the subsequent decline in energy consumption in the U.S. generates a 24% decline in market valuation; accounting for nearly half of what is observed in the data

Keywords: Stock Market; Energy Prices; Tobin's q (search for similar items in EconPapers)
JEL-codes: E22 O33 Q43 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-ene, nep-fmk, nep-his and nep-mac
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Related works:
Working Paper: Oil crisis, Energy Saving Technological Change, and the Stock Market Collapse of 1974 (2004)
Working Paper: Oil crisis, Energy Saving Technological Change, and the Stock Market Collapse of 1974 (2003)
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