Downward Sloping Demand Curves, the Supply of Shares, and the Collapse of Internet Stock Prices

36 Pages Posted: 15 Mar 2006

See all articles by Paul H. Schultz

Paul H. Schultz

University of Notre Dame - Department of Finance

Date Written: March 10, 2006

Abstract

During five weeks over March and April 2000, internet stocks declined 58%. Almost $700 billion in capitalization was lost. This sudden collapse has been attributed to an increase in the supply of shares from lock-up expirations and equity offerings. In this paper, I show that internet stocks collapsed in this period regardless of whether their lock-ups expired or not. Furthermore, daily internet stock portfolio returns were almost unaffected by the number or dollar amount of lock-up expirations that day, or by the amount of stock offered in IPOs or SEOs

Keywords: internet bubble, ipos, lock-up expiration, short-selling

JEL Classification: G10, G14

Suggested Citation

Schultz, Paul H., Downward Sloping Demand Curves, the Supply of Shares, and the Collapse of Internet Stock Prices (March 10, 2006). AFA 2007 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=889776 or http://dx.doi.org/10.2139/ssrn.889776

Paul H. Schultz (Contact Author)

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States
219-631-3338 (Phone)
219-631-5255 (Fax)

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