The dot-com period, roughly between 1995-2000, was characterized by extreme investor optimism for Internet-based businesses. This period was also marked by young, bold managers, who made a good deal of money by reaching consumers only over the Internet. Arguably, the dot-com boom was a case of too much too fast and was consequently followed by a crash in March 2000. Jose Menges is a business student at a California State University. For his senior seminar course, he has been asked to compare the stock performance of Internet-based companies with non-Internet-based companies during the dotcom boom-bust period. He collects monthly data on the adjusted close prices from 1999 to 2000 for four companies. Amazon (AMZN) and eBay (EBAY) are chosen to represent the Internet-based companies, whereas Coca-Cola (COKE) and Johnson and Johnson (JNJ) reflect non-Internet companies. A portion of the data is shown below; the complete data set can be found on the text website, labeled Dotcom.
Monthly Adjusted Close Prices for Four Firms, 1999-2000
|
Month
|
AMZN
|
EBAY
|
COKE
|
JNJ
|
|
January, 1999
|
58.47
|
11.57
|
44.00
|
33.93
|
|
February, 1999
|
64.06
|
13.92
|
43.80
|
34.13
|
|
....
|
....
|
....
|
....
|
....
|
|
December, 2000
|
15.56
|
8.25
|
30.84
|
41.86
|
In a report, use the sample information to:
1. Compute monthly returns for all companies for 1999 and 2000.
2. Compare the stock performance of the Internet-based companies with non-Internet based companies in the dot-com boom-bust period.