Tech Stock Valuation

REFERENCES 101

behavior in a widely traded market, then there would be scant reason to consider

the possibility of pricing bubbles in modern and efficient securities markets.

Bubbles simply do not exist in perfectly efficient securities markets.

According to the efficient market hypothesis, current stock prices always and per-

fectly reflect relevant risk and return information. The efficient markets hypothe-

sis implies that near-term stock-price changes are random and independent. In

such a rational pricing environment, investing is a “fair game” where the expected

excess return for each security or investment asset is zero. Taken literally, this

means ...