Latest Book
The Economics
of the
Stock Market.
Andrew Smithers
The current consensus model for the economy is invalid, being based on aprioristic assumptions which are shown to be invalid when tested against the data. It assumes that managements and shareholders seek to maximise the present value of their companies’ net worth. In fact they respond to the stock market’s assessment of their value.
By basing economics on actual behaviour, rather than on that usually assumed by economists, the Stock Market Model differs sharply from the current consensus. By including finance, it avoids a major weakness in current theory and, being robust when tested against the data, it should be preferred to it.
Print length: 224 pages
Publisher: OUP Oxford
Publication date: 22 Mar. 2022
Latest Articles
Latest
How Share Prices Fluctuate
Andrew Smithers Published in: World Economics • Vol. 25 • No. 4 • October–December 2024 [original pdf] Key Points The stationarity of the stock market’s value (q) and the mean reversion of its real return are its most obvious and exceptional characteristics. These...
Box X: Pensions, Savings and Investment
By Andrew Smithers Published by the NIESR in their Autumn 2024 UK Economic Outlook on 6th November 2024. Introduction This box picks up on two sessions of discussion involving an invited group of those working in financial services, organised by the NIESR,...
Risks facing central banks: action and inaction
Unlike Fed policy in the 1990s, central bank actions this century do not appear overly accommodative, writes Andrew Smithers The aims of economic policy are broadly agreed, with success defined as brisk growth combined with low and stable levels of unemployment and...
Interesting Times
We Live in Interesting Times. The Stock Market’s Response to Changes in Commercial Banks’ Reserves. Recent Experience. The US stock market has moved since mid-2020 with changes in the level of commercial banks’ reserves with the Federal Reserve, as Chart...
How Economic Theory Went Wrong
American Affairs • Spring 2024 The full article is available here. american_affairs_article_spring2024Download
Improving Economic Policy
World Economics • Vol. 24 • No. 2 • April–June 2023 Key Points The consensus model (CM) holds that there is only one equilibrium that needs to be maintained for economic stability. This follows, as a matter of logical necessity, from the model's fundamental...
About the Author
Andrew Smithers
Andrew is the author of multiple books on financial economics including “Valuing Wall Street”, “Productivity and the Bonus Culture” and “The Economics of the Stock Market”. He founded the economics consultancy Smithers & Co.
Contact: info@smithers.co.uk