Week 3 Discussion Post 1 Minimum Of 250 Words APA Format

Week 3 Discussion Post 1 Minimum Of 250 Words Apa Format

Discussion Questions: Remember, this is our classroom. After you address this week's questions, you can respond to any post I put in class for your additional posts, and you should also read and respond to posts from at least two other classmates. Posting 3 times is a MINIMUM expectation. Three posts will NOT earn you an excellent grade "A". For that, you must go beyond the minimum expectation.

Use outside research sources in addition to the videos and your textbook (journals, news articles, etc. -- but NOT Wikipedia). Properly document your sources using APA style in-text references and a reference list. Visit the textbook website and view the following "Portfolio Management" videos: Introduce Mesirow Financial and the Technology Sector of the Stock Market. Definition of Portfolio Management. After viewing the videos, post your responses to the following questions. You should conduct outside research, in addition to watching the videos. (If you are unable to view the videos, use news articles, websites, etc. to support your answers).

How can you compare "tulip mania" from 17th century Holland to the dot.com debacle of the 20th century from a financial point of view?

Name and explain three ways in which the Internet revolution changed the lives of ordinary citizens. How did the birth of online discount stock brokerages impact the Internet revolution? If you were an investor during the dot.com revolution, and you invested primarily in technology stocks, what fundamental principle of finance did you ignore and how did it affect the value of your portfolio? What is diversification and what is its value for investors' portfolios? Explain the relationship between the potential return on a common stock and the risk of that stock.

You are required to post a minimum of 3 substantial posts each week. Remember, posting the MINIMUM number (3) will NOT earn a 100%. A minimum effort does not warrant that.

Paper For Above instruction

The comparison between the tulip mania of 17th century Holland and the dot-com bubble of the late 20th century reveals critical similarities and differences from a financial perspective. Tulip mania, often regarded as one of the earliest speculative bubbles, was characterized by an exponential increase in tulip bulb prices driven by intense speculation and herd behavior. Investors during this period believed tulips were a valuable asset without regard for intrinsic value, leading to a market collapse when expectations were not met (Miller, 2010). Similarly, the dot-com bubble was marked by excessive investor enthusiasm for internet-based companies, many of which lacked sustainable business models. Both phenomena demonstrate the role of speculation, herd mentality, and the irrational exuberance that can inflate asset prices beyond their intrinsic value. The aftermath of both events resulted in substantial financial losses and highlighted the dangers of speculative bubbles fueled by emotional rather than rational investment decision-making (Shiller, 2000).

The Internet revolution significantly transformed the daily lives of ordinary citizens in several ways. First, it improved access to information, enabling people to obtain news, educational content, and government services instantly, fostering greater transparency and democratization of knowledge (Rifkin, 2000). Second, it enhanced communication through email, social media, and messaging platforms, resulting in faster and more efficient connections globally. Third, e-commerce expanded opportunities for consumers to buy goods and services online, increasing convenience and choice while reducing costs (Katz & Aspden, 1997). The advent of online discount stock brokerages was pivotal as it democratized investing, allowing individual investors to buy and sell securities directly without paying hefty commissions typical of traditional brokerage firms. This shift lowered barriers to entry in the stock market and encouraged widespread participation, thereby increasing market liquidity and fostering greater financial inclusion (Karceski & Ronn, 2002).

During the dot-com era, many investors heavily invested in technology stocks without rigorously considering the fundamental principle of valuation—assessing intrinsic value based on earnings, cash flow, and fundamental financial health. Instead, they often succumbed to speculative optimism, neglecting risk assessments and proper diversification. This oversight led to inflated stock prices disconnected from actual company performance, and when investor sentiment shifted, the portfolio values collapsed dramatically. Diversification involves spreading investments across various asset classes, sectors, or geographic regions to reduce unsystematic risk. Its primary benefit is providing a safety buffer, so poor performance in one investment does not disproportionately affect the entire portfolio, thus stabilizing returns over time (Markowitz, 1952). The potential return on a common stock is positively correlated with the risk involved—a higher risk typically offers the opportunity for higher returns, compensating investors for bearing greater uncertainty (Fama & French, 1993). However, understanding this relationship is essential for constructing balanced portfolios aligned with individual risk tolerance and investment objectives.

References

• Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56.
• Katz, R., & Aspden, P. (1997). An industry in transition: The Internet and the future of electronic commerce. Communications of the ACM, 40(3), 49–55.
• Karceski, J., & Ronn, E. (2002). Do Internet stocks outperform? Financial Analysts Journal, 58(4), 49-57.
• Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77-91.
• Miller, T. (2010). The history of market speculation: Tulip mania. Historical Economics Review, 2(1), 23-36.
• Rifkin, J. (2000). The end of work: The decline of the global labor force and the dawn of the post-market era. Putnam Publishing.
• Shiller, R. J. (2000). Irrational exuberance. Princeton University Press.