ng รน a more or less classic Ponzi scheme that followed in a long line of such schemes in the equity markets. Worse yet, much of the investment funds were entrusted to people who had little idea of how to manage a business operation.
Equity stock price growth from 1994 through August 2000 was far greater than equity stock earnings growth. Since June 2002, equity stock price growth and equity stock earnings growth levels have been comparable.
The Efficient Market Hypothesis holds that at any given time, security prices fully reflect all available information. The hypothesis implies, thus, that all investors have access to all relevant information and that all investors use that information. If the efficient market hypothesis is true, then asset bubbles and subsequent crashes should not occur. The period from 1994 through 2000, therefore, was a period in which equity stock process were not consistent with the efficient market hypothesis.
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