In decades past, a rising stock market was a reflection of economic growth. But no longer.

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Shareholders Are Hogging Too Much Economic Growth. It Can’t Last.

New research by finance Prof. Martin Lettau has found that economic growth accounted for less than a quarter of the stock market’s rise over the past 30 years—compared with 92% of the increase in the prior three decades. The biggest driver of the recent bull market? A dramatic shift in wealth from workers to investors, accounting for 54% of the market’s increase since 1989.

That’s the conclusion of Lettau’s new paper, “How the Wealth Was Won,” co-written with Daniel Greenwald of MIT and Sydney Ludvigson of New York University. They show that most of the stock market gains of the past three decades have come from shareholders getting a bigger and bigger piece of the economic pie.

Lettau’s research points to a potentially critical driver of the growing wealth inequality plaguing the U.S.: At a time of slowing economic growth, those at the top of the wealth distribution are reaping most of the rewards, while the share of income received by the rest of households has declined.

The research explores hot-button issues that are not the standard fare for financial economists. Read an interview with Lettau about how the stock market has seized the lion’s share of 30 years of economic growth, and whether this trend is sustainable:

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How the stock market is fueling the wealth gap: Q&A with Prof. Martin Lettau | Haas News | Berkeley Haas

Lettau is an expert in investments and financial markets who holds the Kruttschnitt Family Chair in Financial Institutions at the Haas School of Business. He is available for media interviews.