publication . Preprint . 2002

Stocks as Money: Convenience Yield and the Tech-Stock Bubble

John H. Cochrane;
Open Access
  • Published: 01 Jun 2002
What caused the rise and fall of tech stocks? I argue that a mechanism much like the transactions demand for money drove many stock prices above the 'fundamental value' they would have had in a frictionless market. I start with the Palm/3Com microcosm and then look at tech stocks in general. High prices are associated with high volume, high volatility, low supply of shares, wide dispersion of opinion, and restrictions on long-term short selling. I review competing theories, and only the convenience yield view makes all these connections.
free text keywords: jel:G1
28 references, page 1 of 2

Barberis, Nicholas, Andrei Shleifer, and Jeffrey Wurgler, 2002, “Comovement,” Manuscript.

Baker, Malcom, and Jeremy C. Stein, 2002, “Market Liquidity as a Sentiment Indicator,” Manuscript, Harvard University.

Boudoukh, Jacob, and Robert Whitelaw, 1993, “Liquidity as a Choice Variable: A Lesson from the Japanese Bond Market,” Review of Financial Studies, 6, 266-292. [OpenAIRE]

Boudoukh, Jacob, and Robert Whitelaw, 1991, “The Benchmark Effect in the Japanese Government Bond Market ,” Journal of Fixed Income, 1, 52-59. [OpenAIRE]

Brennan, Michael and Avanidhar Subrahmanyam, 1996, “Market Microstructure and Asset Pricing: On the Compensation for Illiquidity in Stock Returns,” Journal of Financial Economics 41, 441-464. [OpenAIRE]

Campbell, John Y. and John H. Cochrane, 1999, “By Force of Habit: A ConsumptionBased Explanation of Aggregate Stock Market Behavior,” Journal of Political Economy, 107, 205-251.

Chen Joseph, Harrison Hong and Jeremy C. Stein, 2001 “Breadth of Ownership and Stock Returns,” NBER Working Paper 8151, forthcoming Journal of Financial Economics

Duffie, Darrell, Nicolae Gârleanu and Lasse Heje Pedersen, 2001, “Valuation in Dynamic Bargaining Markets,” Manuscript, Stanford University.

Fama, Eugene F. and Kenneth R. French, 1988, “Dividend Yields and Expected Stock Returns,” Journal of Financial Economics 22: 3-27.

Fama, Eugene F. and Kenneth R. French, 2002, “Testing Tradeoff and Pecking Order Predictions about Dividends and Debt,” Review of Financial Studies 15, 1-33.

Fernald, John and John H. Rogers, 2001, “Puzzles in the Chinese Stock Market,” Forthcoming, Review of Economics and Statistics.

Gallant, A. Ronald, Peter E. Rossi, George Tauchen, 1992, “Stock Prices and Volume,” The Review of Financial Studies, 5, 199-242

Harris, Lawrence and Eitan Gurel, 1986, “Price and Volume Effects Associated with Changes in the S&P 500: New Evidence for the Existence of Price Pressure,” Journal of Finance 41, 851-860. [OpenAIRE]

Harrison, Michael, and David Kreps, 1978, “Speculative Investor Behavior in a Stock Market With Heterogeneous Expectations,” Quarterly Journal of Economics 92, 323-336.

Lamont, Owen, and Richard H. Thaler, 2001, “Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs,” manuscript, University of Chicago [OpenAIRE]

28 references, page 1 of 2
Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue