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Asymmetric responses, risk seeking and internet bubble

Asymmetric responses, risk seeking and internet bubble We measure internet bubbles to verify the existence and evaporation of the internet bubble in early 2000. Then, we compare investor responses to internet stocks with those to traditional stocks to find how the internet bubble formed. Empirical results confirm that the internet bubble existed between 1998 and 1999, but began to evaporate in early 2000. Further, we find that the internet bubble formed due to investors' irrational overreaction to internet firms' positive outlooks and underreaction to internet firms' negative outlooks relative to their reactions to traditional firms. This finding supports our hypotheses that asset bubbles formed due to investors' extreme risk-seeking asymmetric responses to good and bad information. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Electronic Finance Inderscience Publishers

Asymmetric responses, risk seeking and internet bubble

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
1746-0069
eISSN
1746-0077
DOI
10.1504/IJEF.2010.035728
Publisher site
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Abstract

We measure internet bubbles to verify the existence and evaporation of the internet bubble in early 2000. Then, we compare investor responses to internet stocks with those to traditional stocks to find how the internet bubble formed. Empirical results confirm that the internet bubble existed between 1998 and 1999, but began to evaporate in early 2000. Further, we find that the internet bubble formed due to investors' irrational overreaction to internet firms' positive outlooks and underreaction to internet firms' negative outlooks relative to their reactions to traditional firms. This finding supports our hypotheses that asset bubbles formed due to investors' extreme risk-seeking asymmetric responses to good and bad information.

Journal

International Journal of Electronic Finance – Inderscience Publishers

Published: Jan 1, 2010

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