ABSTRACT
Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued.
Irving Fisher argued just before the crash that fundamentals were strong and the stock market was
undervalued. In this paper, we use growth theory to estimate the fundamental value of corporate
equity and compare it to actual stock valuations. Our estimate is based on values of productive
corporate capital, both tangible and intangible, and tax rates on corporate income and distributions.
The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were
undervalued relative to the prediction of theory.