May

31

Tech, from Gary Rogan

May 31, 2011 |

 There is nothing more competitive then tech: the smartest people from around the whole world trying to destroy each other globally, huge rate of innovation guaranteeing quick obsolescence and a killer breakthrough-based knock out punch that can come at any minute, lots of unpredictable trends and fashions with the "coolness" factor often ruling the day, very little customer allegiance, and what's there often turning to vengeful disdain when the expectation are not fulfilled even by a little bit. Yet Rocky evidently disagrees that tech cash flows are fleeting.

Alston Mabry adds:

Technological Revolutions and Stock Prices Lubos Pastor University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER) Pietro Veronesi University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER) February 12, 2008

Abstract:

We develop a general equilibrium model in which stock prices of innovative firms exhibit "bubbles" during technological revolutions. In the model, the average productivity of a new technology is uncertain and subject to learning. During technological revolutions, the nature of this uncertainty changes from idiosyncratic to systematic. The resulting "bubbles" in stock prices are observable ex post but unpredictable ex ante, and they are most pronounced for technologies characterized by high uncertainty and fast adoption. We find empirical support for the model's predictions in 1830-1861 and 1992-2005 when the railroad and Internet technologies spread in the United States.


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