Download this Paper Open PDF in Browser

The Valuation and Market Rationality of Internet Stock Prices

42 Pages Posted: 3 Nov 2008  

Eli Ofek

New York University (NYU) - Department of Finance

Date Written: 2002

Abstract

This paper provides an analysis of some existing as well as new evidence of therelation 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, and (iii) the volatility of internet prices. We review several potential explanations of these phenomena, including one based on heterogenous beliefs across investors who are subject to short sales constraints. We provide a discussion of the empirical evidence supporting this latter explanation.

Suggested Citation

Ofek, Eli, The Valuation and Market Rationality of Internet Stock Prices (2002). NYU Working Paper No. FIN-02-033. Available at SSRN: https://ssrn.com/abstract=1294211

Eli Ofek (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Paper statistics

Downloads
199
Rank
129,072
Abstract Views
987