Analysis of the Dot-Com Bubble of the 1990s

37 Pages Posted: 29 Jun 2008

See all articles by John J. Morris

John J. Morris

Kansas State University

Pervaiz Alam

Kent State University

Date Written: June 27, 2008

Abstract

During the dot-com bubble of the 1990s, equity market valuation was a popular topic for investors, financial analysts and academics. Some questioned whether traditional accounting and financial information had lost its value relevance, as stocks traded at multiples of earnings well in excess of historic levels, leading Alan Greenspan to caution against irrational exuberance. This study examines the relation between market valuation and traditional accounting information before, during and after the bubble. We document a decline in the relation between market value and traditional accounting information during the bubble period followed by an increase after the collapse of the market in 2000. We also examine alternative explanations to the irrational exuberance theory, including the quality of earnings, and the aggressiveness of financial analysts' forecasts, finding weak support for either alternative.

Keywords: New Economy, Value Relevance, Capital Markets, Equity Valuation, Earnings Quality, Analyst Forecast

JEL Classification: D21, E44, G12

Suggested Citation

Morris, John J. and Alam, Pervaiz, Analysis of the Dot-Com Bubble of the 1990s (June 27, 2008). Available at SSRN: https://ssrn.com/abstract=1152412 or http://dx.doi.org/10.2139/ssrn.1152412

John J. Morris (Contact Author)

Kansas State University ( email )

Manhattan, KS 66506-4001
United States
785-532-6185 (Phone)

Pervaiz Alam

Kent State University ( email )

P.O. Box 5190
Kent, OH 44242-0001
United States
330-672-1121 (Phone)
330-672-2548 (Fax)

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