Was There a Nasdaq Bubble in the Late 1990s? / Lubos Pastor, Pietro Veronesi.

Format:

Book

Author/Creator:

Pastor, Lubos.

Contributor:

National Bureau of Economic Research.

Veronesi, Pietro.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10581.

NBER working paper series no. w10581

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

Not necessarily. The fundamental value of a firm increases with uncertainty about average future profitability, and this uncertainty was unusually high in the late 1990s. We calibrate a stock valuation model that includes this uncertainty, and show that the uncertainty needed to match the observed Nasdaq valuations at their peak is high but plausible. The high uncertainty might also explain the unusually high return volatility of Nasdaq stocks in the late 1990s. Uncertainty has the biggest effect on stock prices when the equity premium is low.

Notes:

Print version record

June 2004.