The Big Market Delusion : Valuation and Investment Implications

December, 31  2019 // Bradford Cornell and Aswath Damodaran

There is nothing more exciting for a nascent business than the perceived presence of a big market for its products and services, and the allure is easy to understand. In the minds of entrepreneurs in these markets, big markets offer the promise of easily scalable revenues, which if coupled with profitability, can translate into large profits and high valuations. This paper examines how the “big market promise” affects business formation and financing and focuses on the role that overconfidence on the part of entrepreneurs and their financiers (venture capitalists and public equity) plays in creating a collective over pricing of companies in alleged big markets.


Is Tesla a Tech Company?

Following a surprise third quarter earnings beat; Tesla stock has been on a tear, more than doubling in value in less than three months. During this historic run-up, Tesla achieved…

Is the Stock Market Worried About Climate Change?

On Christmas Eve, the MIT Technology Review published an article entitled, The 2010s were another lost decade on climate change.  On New Year’s day, the Washington Post published a longer…

The Big Market Delusion

The Big Market Delusion: Uber Is Not Alone Soon after its introduction as a private company, the market value of Uber began to explode.  One reason was the potential size…

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Is the Market Obscenely Overvalued?

March 20, 2019 // Shaun Cornell

In his recent letter to investors, fund manager John Hussman stated, “This is an obscenely overvalued market.”  


Bubble Stocks 2.0

July 17, 2019 // Bradford Cornell

In Bubble, Bubble, Toil and Trouble, Rob Arnott, Shane Sheppard and I offered a real time definition of a bubble.  We stated,