A Psychoanalytic Interpretation of Dot.Com Stock Valuations

27 Pages Posted: 6 Mar 2005  

David Tuckett

University College London - Centre for the Study of Decision-Making Uncertainty

Richard Taffler

Manchester Business School

Date Written: March 1, 2005

Abstract

Financial economists are unable to provide plausible explanations for Internet stock valuations during the recent asset pricing bubble consistent with market rationality. Adopting a psychoanalytic perspective, this paper argues that investors became caught up emotionally with the drama leading to market prices departing in such an extreme way from fundamental value. Specifically, we propose a psychoanalytic theory of mental objects and show how this helps explain what actually took place during the different phases of dot.com mania. The paper concludes, more generally, that an understanding of how emotions determine psychic reality in stock valuations can usefully complement the contribution of conventional normative asset pricing models.

Keywords: Dot.com stocks, mania, valuation models, psychoanalysis, mental objects

JEL Classification: G10, G12

Suggested Citation

Tuckett, David and Taffler, Richard, A Psychoanalytic Interpretation of Dot.Com Stock Valuations (March 1, 2005). Available at SSRN: https://ssrn.com/abstract=676635 or http://dx.doi.org/10.2139/ssrn.676635

David Tuckett

University College London - Centre for the Study of Decision-Making Uncertainty ( email )

Gower Street
London, WC1 6BT
United Kingdom

HOME PAGE: http://www.ucl.ac.uk/psychoanalysis/unit-staff/david.htm

Richard J. Taffler (Contact Author)

Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

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