They conclude that internet dependent firms have

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They conclude that Internet-dependent firms have lower excess returns than non-Internet firms do in a booming economy and that Internet stocks trade at relatively higher prices than non- Internet stocks. The explosion of Internet technology and behavior of investors and decision makers toward firms that use the Internet suggest that Internet technology must have an impact on firms’ market performance. Stock performance helps investors gauge how well their managers are handling their money. Several studies have proposed different methods to assess stock performance. Armitage & Jog (1996), Rogerson, (1997), and Clinton & Chen (1998) have used economic value as a measure of performance. The economic value added is obtained by comparing profits with the cost of capital involved in obtaining these profits (Stephens & Bartunek, 1997). Johnson & Pazderka (1993) and Sundaram, John, and Kose (1996) have employed stock market performance estimates to measure firm performance. Fama & French (1995), Loughran (1997), Zaher (1997) and Ranganathan & Samarah (2001) employ the stock excess returns based on the Capital Asset Pricing Model (CAPM) to measure stock performance. Historically, the stock values of information technology firms bear very little relationship to classical business performance measures (Savitz, 1998), which creates a need for non-traditional proxies and estimation methods. The statistical methodology incorporated in this study employs a nonparametric approach to comparing the stock market performance of firms across a decade of six different development stages for the information technology industry. The study uses multiple years of data based on the diffusion model hypothesis that the spread of information needs time and stock price momentum reflects gradual diffusion of firm-specific information (Hong & Zhu, 2006). There is no research focusing on stock market volatility of computer network and information technology services companies. TECHNOLOGY ERAS Between 1996 and 2006, several major events in the field of information technology made a lasting impact on many businesses and consumers. Six implicit periods are identified for the purposes of this study. Although somewhat arbitrary, the six periods are placed in twenty- month segments in an effort to capture stock market returns in a broad representative timeframe.
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Page 86 Academy of Accounting and Financial Studies Journal, Volume 15, Number 4, 2011 The six period classifications are the browser era, Y2K era, post-Y2K era, post-9/11 era, outsourcing era, and mobile/wireless era. The browser era is defined in the study as the 20-month period of August 1996 through March 1998. The World Wide Web was but a few years old when Mosaic, often considered the first browser, was introduced. The web was massive and complicated. Prior to Mosaic, access to the Internet was largely limited to text, with any graphics displayed in separate windows.
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