Who Drove and Burst the Tech Bubble?
145 Pages Posted: 24 Oct 2003 Last revised: 17 Nov 2010
Date Written: November 15, 2010
From 1997 to March 2000, as technology stocks rose more than five-fold, institutions bought more new technology supply than individuals. Among institutions, hedge funds were the most aggressive investors, but independent investment advisors and mutual funds (net of flows) actively invested the most capital in the technology sector. The technology stock reversal in March 2000 was accompanied by a broad sell-off from institutional investors but accelerated buying by individuals, particularly discount brokerage clients. Overall, our evidence is most consistent with the bubble model of Abreu and Brunnermeier (2003) where rational arbitrageurs fail to trade against bubbles until a coordinated selling effort occurs.
Keywords: Stock Market Bubbles, Institutional Trading, Individual Trading
JEL Classification: G14, G10
Suggested Citation: Suggested Citation