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    1. Barnhart: Associate Professor, School of Business, Palm Beach Atlantic University, West Palm Beach, FL 33401. Phone 561-803-2484, Fax 561-803-2455, E-mail
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    1. Dwyer: Director, Center for Financial Innovation and Stability, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, NE, Atlanta, GA 30309; Phone 404-498-7095, Fax 404-498-8810, E-mail
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    • We thank Lucy Ackert, Mardi Dungey, Ann Gillette, Scott Hein, Mark Fisher, Delroy Hunter, Cesare Robotti, and Paula Tkac for numerous helpful comments. We have received helpful comments from participants at seminars at the Federal Reserve Bank of Atlanta, the Bank of Finland, Cambridge Endowment for Research in Finance at Cambridge University, the City University Business School in London, EDHEC, Louisiana State University, the University of Carlos III, and the University of Georgia. Two referees' comments significantly improved the paper. Pam Frisbee, Budina Naydenova, and Shalini Patel provided excellent research assistance and Linda Mundy put everything together. Dwyer thanks the Spanish Ministry of Education and Culture for support of projects SEJ2007-67448/ECON and ECO2010-17158. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any errors are the authors' responsibility.


We examine investors' returns from publicly traded stock in new industries associated with major changes in transportation and communication in the United States. Return distributions during the development of own-brand personal computers, airlines, airplane and automobile manufacturers, railroads, and telegraphs reveal three general characteristics. A few companies generate outstanding returns, many firms fail, and returns are volatile. Firms' expected returns are higher than market returns for three of the five industries. Sharpe ratios and Jensen's alphas for portfolios of each new industry indicate that portfolios of stocks in firms in new industries are not an obvious bad deal. (JEL G1, G12, N2, N21, N22)