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Paper Stats:
Abstract Views: 3346
Downloads: 1166
Download Rank: 2052
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DotCom Mania: A Survey of Market Efficiency in the Internet Sector
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ELI OFEK
New York University - Department of Finance
MATTHEW P. RICHARDSON
New York University - Department of Finance; National Bureau of Economic Research (NBER)
April 2001
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Abstract:
This paper provides a survey of some existing as well as new evidence of the relation between market prices and fundamentals in the internet sector over the period January 1998 to February 2000. Appealing to results across a broad class of outcomes, we demonstrate a strong, circumstantial case against market rationality. In particular, we investigate (i) the level of internet stock prices given their underlying fundamentals, (ii) responses of stock prices to information-based events, (iii) internet-related anomalies, and (iv) the volatility of internet prices. As a potential explanation, we appeal to a model of heterogenous agents with varying degrees of beliefs about asset payoffs who are subject to short sales constraints. In this framework, it is possible that "optimistic" investors overwhelm "pessimistic" ones, leading to prices not reflecting fundamental values. Empirical support for this model is provided using data from the stock shorting market.
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Keywords: Market efficiency, investments, event study, Internet
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JEL Classifications: G12, G14
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Working Paper Series
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Suggested Citation
Ofek, Eli and Richardson, Matthew P., "DotCom Mania: A Survey of Market Efficiency in the Internet Sector"
(April 2001).
Available at SSRN: http://ssrn.com/abstract=268311
or DOI: 10.2139/ssrn.268311
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Contact Information for
ELI
OFEK
(Contact Author)
Email address for ELI
OFEK
New York University - Department of Finance
Stern School of Business
44 West 4th Street
New York
, NY
10012-1126
United States
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Contact Information for
MATTHEW
P.
RICHARDSON
Email address for MATTHEW
P.
RICHARDSON
New York University - Department of Finance
44 West 4th Street
Suite 9-190
New York
, NY
10012-1126
United States
212-998-0349 (Phone)
212-995-4233 (Fax)
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(No e-mail address available for MATTHEW
P.
RICHARDSON
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge
, MA
02138
United States
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May 09, 2001 |
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