The Role of the Media in the Internet IPO Bubble
Hong Kong University of Science & Technology - HKUST School of Business and Management
Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)
University of Melbourne - Department of Finance; Financial Research Network (FIRN)
University of Colorado at Denver
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
We read all news items that came out between 1996 and 2000 on 458 internet IPOs and a matching sample of 458 non-internet IPOs - a total of 171,488 news items - and classify each news item as good news, neutral news, or bad news. We first document that the media was more positive for internet IPOs in the period of the dramatic rise in share prices, and was more negative for internet IPOs in the period of the dramatic fall in share prices. We then document that media hype is unable to explain the internet bubble: there was a 1646% difference in returns between internet stocks and non-internet stocks from January 1, 1997 through March 24, 2000 (the market peak), and the media can explain only 2.9% of that.
Number of Pages in PDF File: 51
Keywords: Initial public offering, media, internet bubble
JEL Classification: E32, G12, G14, G24, G30
Date posted: September 4, 2007
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