The stock market and capital accumulation

The value of a firm's securities measures the value of the firm's productive assets. If the assets include only capital goods and not a permanent monopoly franchise, the value of the securities measures the value of the capital. Finally, if the price of the capital can be measured or inferred, the quantity of the firm's capital is the value divided by the price. A standard model of adjustment costs enables the inference of the price of installed capital. I explore the implications of the proposition using data from U.S. non-farm, non-financial corporations over the past 50 years. The data imply that corporations have formed large amounts of intangible capital, especially in the past decade. The resources for expanding capital have come from the output of the existing capital. An endogenous growth model can explain the basic facts about corporate performance, with a substantial but not implausible increase in the productivity of capital in the 1990s.