ABSTRACT
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 inMarch 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.
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 inMarch 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.
Who Drove and Burst the Tech Bubble?
