Internet Traffic and Portfolio Returns

Posted: 31 Jul 2001

See all articles by Baruch Lev

Baruch Lev

New York University - Stern School of Business

Ron Lazer

New York University (NYU) - Department of Accounting

Joshua Livnat

New York University; Prudential Financial - Quantitative Management Associates

Abstract

We examined whether traffic data on sites owned by publicly listed Internet companies provide information about the future of those companies that is useful in portfolio management. The study shows that when Internet companies are classified into portfolios according to above-median and below-median traffic data, the more popular sites provide significantly better stock returns than the less popular sites. These results may be explained by the superior ability of popular sites to attract advertising revenues and extract greater compensation from affiliated sites. They may also indicate investors' perceptions that the more popular sites have greater network externalities (in which the value of being a part of the network increases with the number of members already in the network) and have the ability to generate higher future profits and cash flows. These results carried through to offline companies with Internet sites in 1999 but not in 2000, possibly because the online operations of offline companies were still not a material component of the companies' revenues and cash flows.

Suggested Citation

Lev, Baruch Itamar and Lazer, Ron and Livnat, Joshua, Internet Traffic and Portfolio Returns. Financial Analysts Journal, Vol. 57, No. 3, May/June 2001, Available at SSRN: https://ssrn.com/abstract=272635

Baruch Itamar Lev (Contact Author)

New York University - Stern School of Business ( email )

40 West 4th Street, Suite 400
New York, NY 10012
United States
212-998-0028 (Phone)
212-995-4001 (Fax)

HOME PAGE: http://www.baruch-lev.com

Ron Lazer

New York University (NYU) - Department of Accounting ( email )

40 W. 4th St., 423
Suite 10-180
New York, NY 10012
United States

Joshua Livnat

New York University ( email )

44 West 4th Street, Suite 10-76
Stern School of Business
New York, NY 10012-1118
United States
212-998-0022 (Phone)
212-995-4004 (Fax)

Prudential Financial - Quantitative Management Associates ( email )

2 Gateway Center
6th Fl.
Newark, NJ 07102
United States

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