**5. Assessment of indices rise in North America, Europe and Asia**

The indices' values are assessed throughout their period of rise all over the regions in the world. Mean comparison with key performance indicators are offered.

#### **5.1. Mean comparison**

At first, mean comparison is offered to obtain a general view on the explored indices as seen in **Table 1**.

Firstly, the mean comparison showed that on a regional level, for instance in North America, Europe, and Asia, the technology sector showed top returns and one of the highest probabilities for equal means in comparison to the Nasdaq Composite index performance in the nineties years of the twentieth century.

Second, the probabilities increased on a local level for the Nasdaq Composite index, Deutscher Aktien Index 30, the TecDax and the Hang Seng Index. These results, however, have to be interpreted cautiously because the increased probability is most likely due to the prolonged but mild increase before the actual bubble.

Thirdly, the results for the China Securities Index 300 show a considerable similarity to the Nasdaq Composite index in the 1990s of the twentieth century. The probability of equal means for returns is as high as 88.01% for the China Securities Index 300 index and the Nasdaq Composite index in the inflation phase.

#### **5.2. Key performance indicators**

The analysis yielded mixed results of the key performance indicators with room for interpretation, including some early warning signals but still the potential to develop either way in the future. On a regional level, the price-to-earnings ratios are as high up as shortly before the actual bubble in the 1990s of the twentieth century as seen on **Figure 4**.

At this point, the irrational exuberance speech by Alan Greenspan from 1996 could be appropriate again. In fact, the Federal Reserve System just increased the federal funds rate to 0.25– 0.5% in December 2015. On a local level, the price-to-earnings ratio remains at moderate levels with the exception of the China Securities Index 300, where a peak in the summer of 2015 yet again confirmed the thesis of a bubble from the mean comparison section.


**Table 1.** Nasdaq composite versus Datastream technology phases. Source: own elaboration by the authors.

**Figure 4.** Price-to-earnings ratio by region. Source: Own elaboration by the authors.

**5.1. Mean comparison**

nineties years of the twentieth century.

102 Financial Management from an Emerging Market Perspective

but mild increase before the actual bubble.

Composite index in the inflation phase.

**monthly return (%)**

December 1990 to October 1998

November 1998 to March 2000

2002

April 2009 to December 2015

April 2000 to October

**5.2. Key performance indicators**

in **Table 1**.

At first, mean comparison is offered to obtain a general view on the explored indices as seen

Firstly, the mean comparison showed that on a regional level, for instance in North America, Europe, and Asia, the technology sector showed top returns and one of the highest probabilities for equal means in comparison to the Nasdaq Composite index performance in the

Second, the probabilities increased on a local level for the Nasdaq Composite index, Deutscher Aktien Index 30, the TecDax and the Hang Seng Index. These results, however, have to be interpreted cautiously because the increased probability is most likely due to the prolonged

Thirdly, the results for the China Securities Index 300 show a considerable similarity to the Nasdaq Composite index in the 1990s of the twentieth century. The probability of equal means for returns is as high as 88.01% for the China Securities Index 300 index and the Nasdaq

The analysis yielded mixed results of the key performance indicators with room for interpretation, including some early warning signals but still the potential to develop either way in the future. On a regional level, the price-to-earnings ratios are as high up as shortly before the

At this point, the irrational exuberance speech by Alan Greenspan from 1996 could be appropriate again. In fact, the Federal Reserve System just increased the federal funds rate to 0.25– 0.5% in December 2015. On a local level, the price-to-earnings ratio remains at moderate levels with the exception of the China Securities Index 300, where a peak in the summer of 2015 yet

**Time span Nasdaq composite Datastream technology Welch-Satterthwaite** 

**t-test (%) Average** 

1.59 4.61 2.03 5.44 54.28

6.84 6.90 6.30 9.07 99.57

−4.71 10.74 −5.19 13.75 80.43

1.70 4.96 1.50 5.28 80.56

**Table 1.** Nasdaq composite versus Datastream technology phases. Source: own elaboration by the authors.

**Average monthly return (%)**

**Standard deviation (%)**

actual bubble in the 1990s of the twentieth century as seen on **Figure 4**.

again confirmed the thesis of a bubble from the mean comparison section.

**Standard deviation (%)**

**Figure 5.** Price-to-book ratio by region. Source: Own elaboration by the authors.

The sales and earnings, for instance earnings before interest, taxes, depreciation and amortisation, figures show mostly support for rising indices with a few exceptions. On a regional level, both sales and earnings are stagnating or even declining, so there is little evidence for optimistic index increases for Europe as a whole. The same is true for all Chinese indices: for instance the Hang Seng Index and the China Securities Index 300. There the sales and earnings are stagnating or declining as well. So at these levels again, the thesis for a possible bubble is strengthened.

**Figure 5** shows that on a regional level, the price-to-book ratios are again as high as right before the outbreak of the actual dot-com bubble. Therefore, they should be interpreted as a warning sign for investors. On a local level only the China Securities Index 300 ratio yet again confirms the occurrence of a bubble in middle of 2015 with an extreme peak.
