Technology Sector Privite Equity and a New Speculative Bubble Term Paper - 1

Technology Sector Privite Equity and a New Speculative Bubble - Term Paper Example According to US securities law, a private company is not permitted to have more than 500 individual investors without making its financial information public. Being a private company, Facebook is not required by the SEC to share financial information with investors at this time. In this paper, we will take a look at the history and features of speculative bubbles including the technology bubble of the late nineties (dot com bust) in an attempt to use economic data to analyze today’s environment to detect the presence of a bubble and its potential impacts. Speculative bubbles have long fascinated and puzzled economists across many time periods. From the original Tulip Mania of the 1630’s to the Dot- Com bubble of the late nineties, these phenomena have kept economists on their toes for centuries, in trying to pin down substantive causative agents that are responsible for the swift increase in the market values of particular assets. Till today, experts have been unable to chalk down exact reasons for the emergence of such bubbles as they can rise up even in the most predictable markets; where the market participants can very accurately calculate the intrinsic value of the assets and where speculation plays no part in the actual valuation process. What is the origin of bubbles? Simply put, speculative bubbles are caused by â€Å"precipitating factors† that have the ability to bring about a change in the public’s perception about the value of an asset and about the future prospects of that asset, which can have an im mediate impact on demand (Shiller , 2000) One of the most famous economists of all time, John Maynard Keynes pointed out in his book â€Å"The General Theory of Employment, Interest and Money†, that abrupt and immediate stock price changes have their roots in the â€Å"collective crowd behavior† of the various market agents more than anything else and that in almost all such scenarios, these rises in prices have