Panorama of NASDAQ Stock Bubbles and Aftermath

Tseng, K. C.
June 2004
American Business Review;Jun2004, Vol. 22 Issue 2, p61
Academic Journal
The extraordinary volatility of high tech stocks has an extremely important impact on the high technology industries, the investors' confidence, and the economy as a whole. In this study, the focus is placed on the extreme volatility of NASDAQ stocks in the 1990's and subsequent sharp decline from March 2000 to October 2002. The author has found that psychological factors such as overconfidence, overreaction, under-reaction, autocorrelation of stock prices, business cycle, accounting issues, and the unpredictability of high technology industries are the principal factors contributing to the said volatility. The author notes that given the very complex factors affecting values and prices of stocks and other assets, even the generally rational investors may not exercise the best judgment and make the optimal decisions under highly risky and uncertain conditions.


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