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Downward‐Sloping Demand Curves, the Supply of Shares, and the Collapse of Internet Stock Prices
Author(s) -
SCHULTZ PAUL
Publication year - 2008
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01318.x
Subject(s) - stock (firearms) , the internet , initial public offering , liberian dollar , equity (law) , business , portfolio , monetary economics , economics , finance , geography , archaeology , world wide web , computer science , political science , law
Over March and April 2000, Internet stocks lost 56%, or $700 billion. This sudden collapse has been attributed to an increasing supply of shares from lockup expirations and equity offerings. I show that Internet stocks collapsed in this period regardless of whether their lockups expired. Furthermore, daily Internet stock portfolio returns were almost unaffected by the number or dollar amount of lockup expirations that day, or by the amount of stock offered in IPOs or SEOs. Most of the Internet stock decline is explained by poor marketwide returns, particularly for growth stocks.