The Role Of Capital Market Intermediaries

Topics: United States housing bubble, Dot-com bubble, Economic bubble Pages: 1 (284 words) Published: February 10, 2015
The Role of Capital Market Intermediaries in the Dot-Com Crash of 2000 The dot-com crash was a stock market crash that popped to near-devastating effect in 2001. Many investors lost substantial sums of money, helping to trigger a mild economic recession in the early 2000s. Several factors combined to cause the dot-com crash, which is usually defined as the period of investment and speculation in Internet firms that occurred between 1995 and 2001. The year 1995 marked the beginning of a major jump in growth of Internet users, who were seen by companies as potential consumers. As a result, many Internet start-ups were born in the mid to late 1990s.The issues of the crash were also compounded by outside factors, like a rise in outsourcingthat led to widespread unemployment among computer developers and programmers. The market also took a major downturn in the wake of terrorist attacks in the United States in 2001, and companies that had engaged in shoddy or questionable bookkeeping were essentially caught with their pants down in a series of government investigations. The loss of consumer faith in the tech industry also depressed earnings for dot-coms. In my opinion,economic bubbles are part of the capitalist market cycles, it is very difficult to say who was primarily responsible for a economic bubble. But take the 2000 Dot-Com bubble case, if we really have to identify someone who was more responsible than others, it seems it may be the sell-side analysts. The primary party at fault would be underwriters because they helped inefficient companies go through the IPO and advertised for them, even though they knew the company was overvalued and under-performing.
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