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Published: November 12, 2006
This paper explains that John. R. M. Hand notes, because the internet was changing the business landscape with such speed, normative financial methods such as
earnings and book values are unable to give financial analysts a working window into how internet wealth is created. The author points out that, Hand relates that log-linear
regressions were able to yield lower
pricing errors for internet stocks better than using regressions of unscaled data and that his methodology is able to reduce pricing errors. The paper hypothesizes that, although Hand's formulas can be used to analyze the geometric growth of a particular
market based on intangible assets, straight line
linear progression analysis of true earnings and book values still have their place as a base line evaluation of a weakening then falling technology market that we experienced between 2000 LQ and 2001 LQ. Chart.
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