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(2003)
Dotcom Mania: The Rise and Fall of Internet Stock Prices
- Publisher
- Emerald Publishing
- Copyright
- Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
- ISSN
- 0307-4358
- DOI
- 10.1108/03074350410769380
- Publisher site
- See Article on Publisher Site
Abstract
We examine the stability of market prices for 35 technology and 35 industrial stocks for the period December 31, 1993 to October 31, 2002. A phase portrait plot of the detrended log prices and de‐meaned returns of the two sectors shows a chaotic pattern in the stock prices indicating the presence of nonlinearity. However, when we compute the Lyapunov exponents, negative values are obtained. This shows that the price fluctuations for the 70 stocks result primarily from diffusion processes rather than from nonlinear dynamics. We evaluate forecast errors from a naïve model, a neural network, and ARMA models and find that the forecast errors are correlated with average changes in closed‐end fund discounts and other sentiment indexes. These results support an investor sentiment explanation for the closed‐end fund puzzle and behavioral theories of investor overreaction.
Journal
Managerial Finance – Emerald Publishing
Published: Dec 1, 2004
Keywords: Emerging markets; Stock markets; Shareholders