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Herd Behaviour in Financial Markets: Evidence from the Technology Sector
Máca, Jaroslav ; Kukačka, Jiří (advisor) ; Hronec, Martin (referee)
This thesis provides an evidence of herd behaviour in financial markets with an emphasis on the technology sector. The adjusted closing prices for the NASDAQ-100 index constituents are analysed on a daily basis during the period 2011-2020. Regarding methodology, the commonly utilized measures of cross-sectional standard deviation of returns and of cross-sectional absolute deviation of returns are considered. The examination reveals no evidence of herd behaviour, even when filtering trading sessions based on extraordinary market volatility or trading volume. However, a closer look at 2020, in which financial markets movements were heavily affected by the ongoing COVID-19 pandemic, shows that herd behaviour contributed to the sharp and significant crash as well as to the subsequent skyrocketing recovery. Furthermore, this thesis presents an innovative way of using an external factor in regression models. Due to their dominant position, the so-called technology giants are excluded from the US stock market and they newly constitute the world market. This specification reveals that the dispersions of the technology giants are contagiously amplified to the rest of the technology sector. Therefore, investors should be aware of the risks associated with a possible cooling of the entire technology sector following...
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Fundamental Analysis and Stock Return: The Case of Big Tech
Tran Nguyen, Thai Nhat Phi ; Krištoufek, Ladislav (advisor) ; Máková, Barbora (referee)
Bibliographic note TRAN NGUYEN, Thai Nhat Phi. Fundamental Analysis and Stock Return: The Case Of Big Tech. Prague 2020. 102 pp. Bachelor thesis (Bc.) Charles University, Faculty of Social Sciences, Institute of Economic Studies. Thesis supervisor doc. PhDr. Ladislav Krištoufek Ph.D. Abstract Six out of the ten most valuable companies by market capitalisation are, at their core, technology companies and four of these have at some time crossed the $1 trillion market cap, which has ignited a public discussion regarding their astronomic valuations and the tech bubble. This work addresses this development, with the analysis of four companies, namely Google, Apple, Facebook and Amazon (GAFA), which have dominated their respective fields of business in the "new economy". We go beyond the stock analysis and also examine the company's fundamentals and their effect on the valuations, furthermore we fuse the insights of both analyses to offer a more comprehensive evaluation of these four companies. The results suggest that their stock value accurately portrays their market dominance and that it is deeply rooted in the companies' fundamentals which are fairly well reflected in the stock price movements. Ultimately, we find that these companies do not contribute to the tech bubble as GAFA show unparalleled financial...
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