Internet Bubble History

Table of Contents

Introduction7

Discussion7

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Internet Bubble History

Table of Contents

Introduction3

Discussion3

Conclusion8

References9

Internet Bubble History

Introduction

 When prices rise above the justified economic fundamentals, it is called a “Speculative bubble”. The ways to measure an assets fundamental value are multiple; one of them is by discounting an anticipated cash flow an asset may grow (Lansing, K.  J., 2007). Certain aspect of fundamental valuation is to increase asset price during bubbles, and continue raising it to the point it becomes being over price. Price continues to rise above, far stretching any realistic estimation. The process continues until an event occurs that thumps the buying which leads to continual decline in price. As per Economists and Scholars, the disciplines that cause increase in prices are can be government regulation or deregulation, technology, monetary policy, demographic changes, cultural changes, expansion in media reporting, decline in inflation, increase in gambling and analytical forecast. During the increase in prices, feedback mechanism is analyzing the reason of increase. In the speculative bubbles, price growth by investors is sometimes an external factor for example new era. The investors predict the external factors; they buy more assets under the judgment of their anticipation which makes an impact on price increase.

Discussion

The internet bubble history is a result of many causes working together. The increase in the equity prices during the 2nd half of the year 90's concluded doubling of the NASDAQ in one year from March 1999-2000. There was a worldwide obsession for the new millennium, as Y2K is known not just as a computer bug to reduce the effect. The investors believed that a “new era” was coming forth (Guttman, R., 2009). The hype was created over the extraordinary advancement in the burgeoning World Wide Web. In the year 1998, the NASDAQ was sated with internet firms established by entrepreneurs, financed by venture capitalist to form and IPO's were marketed by investment bankers. The start up of commercialism at a huge level represented that internet technology has enforced the theme and time period of new era. It was anticipated that internet technology would instantly influence the structure of stock market, corporate structure and the business procedure followed. It was a gateway to opportunity for companies that could create new way to resolve customer issues and provide products and services via internet (Wheale,  P.  R.  &  Amin,  L.  H., 2003)

Shiller explained the precedents of technology that, internet is comparably more important as compared personal computer and television. The impression of internet is brighter than that at the time of introduction of television or personal computer. Utilization of internet gives a user sense of leadership over the world. They are practically travelling over the world virtually which was impossible in the past. There are many possibilities such as putting up a website and being a part of the world economy which was an impossible previously. Due to the brighter and immediate personal adoption of the internet, it is easier for people to agree to the fact that internet will be of ...