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1. It has been argued that the information technology stock price bubble of 2000 was the result of an overvaluation of share prices, that in
1. It has been argued that the information technology stock price \"bubble\" of 2000 was the result of an overvaluation of share prices, that in turn was the result of information asymmetry, and the subsequent market collapse was therefore to some extent predictable. Use the \"lemons\" model to evaluate this statement. Hints: To answer this, focus on the initial public offerings (IP05) of new, high tech start-up companies. (In an IPO, the initial owners of the start-up sell shares to the general public, allowing the owners to \"cash out\". During the late 19905, these IPOs were heavily subscribed, with share prices of the start-ups often skyrocketing far in excess of the initial asking price. After the market crash, the [PO market for new tech companies dried up.) (1)
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