Was There a Nasdaq Bubble in the Late 1990s?

Lubos Pastor and Pietro Veronesi

No 10581, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G0 G1 (search for similar items in EconPapers)
Date: 2004-06
New Economics Papers: this item is included in nep-cfn
Note: AP
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Citations: View citations in EconPapers (12)

Published as Pastor, Lubos and Pietro Veronesi. "Was There A Nasdaq Bubble In The Late 1990s?," Journal of Financial Economics, 2006, v81(1,Jul), 61-100.

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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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