Working Paper No. 54

Stock Market Short-Termism

Many economists have argued that equity markets are characterized by myopia. Investors want immediate returns, and the managers of publicly traded funds are induced to sacrifice long-term growth in order to give it to them. In this paper, I explore the ”short-termism” argument, survey the weak empirical evidence for it, and critique several proposals which have been advanced as a corrective to it.

Download the Full Working Paper

Derek Bonett is a policy analyst at the Cato Institute, where he writes on a range of regulatory issues, with a particular emphasis on financial markets and commercial banking.