ng the price escalation phase of a bubble. The contention that irrational decision-making behaviors on the part of investors lead to long-term volatility in asset pricing and the resulting market reversals (does not support the efficient market hypothesis) was supported.
The findings of Case Study Three were mixed. The testing of one hypothesis rejected the efficient market hypothesis as an explanation for bubble price behavior, while the testing of the second hypothesis failed to reject the efficient market hypothesis as an explanation for bubble price behavior.
One conclusion drawn is that the efficient market hypothesis does not provide a reliable explanation of stock market price behavior during the price escalation phase of a bubble. A cautious second conclusion drawn is that behavioral finance likely can provide reliable explanations of stock market price behavior during the price escalation phase of a bubble.
1. INTRODUCTION ............................... 1
Introduction to the Study ................ 1
Statement of the Problem ................. 2
Research Questions .................... 4
Research Hypotheses ................... 4
Purpose of the Study ..................... 5
Theoretical Framework .................... 6
Methodological Approach .................. 12
2. REVIEW OF LITERATURE ....................... 15
Introduction to the Literature Review .... 14
Review of the Background and Theoretical
Literature Related to Asset Bubble-Crash-
Recovery Episodes ........................ 15
Assessing the Tulip Bulb Craze ......... 18
South Sea Campany Bubble ............... 20
Florida Real Estate Craze .............. 22
Nifty-Fifty Ear ........................ 24
Equity Asset Bubble in Japan ........... 24
Assessing the Internet IPO Bubble ...... 27
Review of the Background and Theoretical
Markets Hypot...