Discussion of 'the Internet Downturn: Finding Valuation Factors in Spring 2000'

Abstract

This article reviews 'The Internet downturn: Finding valuation factors in Spring 2000' by Elizabeth Keating, Thomas Lys, and Robert Magee (KLM). Their paper contributes to a growing literature on the valuation of Internet firms, finding strong relations among market prices, accounting variables, and assorted 'new economy' measures of performance. I argue that their results tell us more about investors' (mis-) perceptions in Spring 2000 than about the underlying economics of Internet firms. Moreover, the valuations seem unlikely to repeat. KLM's findings may not generalize to other firms or time periods.

Keywords: Internet Stock, Valuation, Market Efficiency, Cross-sectional Regression

JEL Classification: G14, M41