Who Drove and Burst the Tech Bubble?
Article first published online: 19 JUL 2011
© 2011 The American Finance Association
The Journal of Finance
Volume 66, Issue 4, pages 1251–1290, August 2011
How to Cite
GRIFFIN, J. M., HARRIS, J. H., SHU, T. and TOPALOGLU, S. (2011), Who Drove and Burst the Tech Bubble?. The Journal of Finance, 66: 1251–1290. doi: 10.1111/j.1540-6261.2011.01663.x
- Issue published online: 19 JUL 2011
- Article first published online: 19 JUL 2011
From 1997 to March 2000, as technology stocks rose more than five-fold, institutions bought more new technology supply than individuals. Among institutions, hedge funds were the most aggressive investors, but independent investment advisors and mutual funds (net of flows) actively invested the most capital in the technology sector. The technology stock reversal in March 2000 was accompanied by a broad sell-off from institutional investors but accelerated buying by individuals, particularly discount brokerage clients. Overall, our evidence supports the bubble model of Abreu and Brunnermeier (2003), in which rational arbitrageurs fail to trade against bubbles until a coordinated selling effort occurs.