Was There A Nasdaq Bubble in the Late 1990s?

Pietro Veronesi and Pástor, Luboš
Authors registered in the RePEc Author Service: Lubos Pastor

No 4485, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Bubble; Valuation; Uncertainty (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2004-07
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Was there a Nasdaq bubble in the late 1990s? (2006)
Working Paper: Was There a Nasdaq Bubble in the Late 1990s? (2005)
Working Paper: Was There a Nasdaq Bubble in the Late 1990s? (2004)
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