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Investor Behavior over the Rise and Fall of Nasdaq


  • John M. Griffin

    () (Yale University, School of Management)

  • Jeffrey H. Harris

    () (University of Delaware, Alfred Lerner College of Business and Economics, Department of Finance)

  • Selim Topaloglu

    () (Queen's University (Canada), School of Business)


The large theoretical literature about bubbles includes models where naive individuals cause excessive price movements and smart money trades against (and potentially eliminates) a bubble or where sophisticated investors follow market prices and help drive a bubble. We examine these competing views by focusing on investor activity over the spectacular rise and fall of Nasdaq from September 1999 through 2001. We find that both institutional ownership levels and volume on Nasdaq were high. Institutions bought shares from individuals the day after market up-moves and institutions sold on net following market dips. These patterns are pervasive throughout the market run-up and subsequent crash period. This short-term institutional trend-chasing behavior does not appear to be mechanically induced by flows into and out of mutual funds. Our evidence supports the view that institutions contributed more than individuals to the Nasdaq rise and fall.

Suggested Citation

  • John M. Griffin & Jeffrey H. Harris & Selim Topaloglu, 2003. "Investor Behavior over the Rise and Fall of Nasdaq," Yale School of Management Working Papers ysm431, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm431

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    Cited by:

    1. John M. Griffin & Federico Nardari & Rene M. Stulz, 2004. "Stock Market Trading and Market Conditions," NBER Working Papers 10719, National Bureau of Economic Research, Inc.
    2. Owen A. Lamont & Jeremy C. Stein, 2004. "Aggregate Short Interest and Market Valuations," American Economic Review, American Economic Association, vol. 94(2), pages 29-32, May.
    3. George Horia Ionescu & Dragos Mihai Ungureanu & Ruxandra Dana Vilag & Florian Bogdan Stoian, 2009. "Financial Contagion And Investors Behavior," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(11), pages 1-57.
    4. Ravi Dhar & William Goetzmann, 2005. "Bubble Investors: What Were They Thinking?," Yale School of Management Working Papers ysm446, Yale School of Management, revised 01 Aug 2006.
    5. Huh, Sahn-Wook & Subrahmanyam, Avanidhar, 2004. "Order Flow Patterns around Seasoned Equity Offerings and their Implications for Stock Price Movements," University of California at Los Angeles, Anderson Graduate School of Management qt6nm0966w, Anderson Graduate School of Management, UCLA.
    6. Krishnan, C.N.V. & Singh, Ajai K. & Zebedee, Allan A., 2006. "An examination of large sell orders in cold IPO aftermarkets," Journal of Financial Markets, Elsevier, vol. 9(2), pages 119-143, May.
    7. Sahn-Wook Huh & Avanidhar Subrahmanyam, 2005. "Order Flow Patterns around Seasoned Equity Offerings and their Implications for Stock Price Movements-super-," International Review of Finance, International Review of Finance Ltd., vol. 5(1-2), pages 75-111.

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