Magazine article Foreign Policy

Oppa Gangnam Bubble

Magazine article Foreign Policy

Oppa Gangnam Bubble

Article excerpt

THIS YEAR'S NOBEL PRIZE IN ECONOMICS WENT to, among others, Robert Shiller, the pioneering behavioral economist whose research on asset bubbles and market psychology uncovered profound irrationality.

For evidence of this irrationality, look no further than the stock price of a little semiconductor company called Di-Corp, which rose to prominence in 2012 on the shoulders of PSY'S mega-hit, "Gangnam Style." It turns out that the South Korean pop star happens to be the son of the company's chairman and CEO, Park Won-ho. That this has zero bearing on the quality of Di-Corp's management or its semiconductors seemed to matter little to investors. The company's stock price surged, increasing almost 800 percent in the three months after the video was posted online, based on almost no material information about the company whatsoever.

At the time, the surge was presumed to be driven by South Korean fans, who have a penchant for what are called "theme stocks"--equities whose share prices shoot up based on some exogenous event that has little to do with business fundamentals. …

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