Dot Com Bubble

Principles of Finance

Individual Assignment

Dot Com Bubble

Lecturer: Andrew Sadler

Student: Nguyen Ngoc Thu An

Date: March 22, 2012

Lecturer: Andrew Sadler

Student: Nguyen Ngoc Thu An

Date: March 22, 2012

ERC Institute Vietnam

88 Huynh Van Banh, Ward 15, Phu Nhuan District, HCMC

Email: info@erci.edu.vn - Website: www.erci.edu.vn

ERC Institute Vietnam

88 Huynh Van Banh, Ward 15, Phu Nhuan District, HCMC

Email: info@erci.edu.vn - Website: www.erci.edu.vn

Table of Contents

II. Financial Bubble. 3

1. What is a financial bubble? 3

2. What and how do the financial bubbles happen? 3

3. Why and how do financial bubbles end? 4

III. Dot-com Bubble 4

1. What happened in the Dot-com Bubble? What were its causes and how did it end? 4

IV. The New Economy. 5

V. The second dot-com bubble. 6

VI. References. 8

Financial Bubble.

What is a financial bubble?

Financial bubble is an issue that happens because people invest too much into any specific market. Any bubble has a certain amount of air and assuredly, the bubble will be exploded when it cannot contain anymore. Similarly, the asset prices are going up day by day because people put money too much into these assets and take part in raising the prices unrealistically. Financial bubble can happen to many kinds of market such as real estate, gold, oil, stock, etc. (401kFundAdvice.com, 2012) For instance, Japan had to face with a huge real estate and stock bubble in the late 1980s or the dot-com bubble in the late 1990s and early 2000s (The Common Sense Investor, 2012).

What and how do the financial bubbles happen?

Financial bubbles happen everywhere and for many reasons. In order to expand the economy and put more money into the financial system. The banks offer low interest rates, thus people can borrow money easily. The investors will have a chance to raise their capital in borrowing money from the banks and invest into another assets such as houses or stocks....