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The Role of the Media in the Internet IPO Bubble

Utpal Bhattacharya
Indiana University Bloomington - Department of Finance

Neal Galpin
Texas A&M University - Department of Finance

Xiaoyun Yu
Indiana University Bloomington - Department of Finance; China Academy of Financial Research (CAFR)

Rina Ray
Norwegian School of Economics and Business Administration (NHH)

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Abstract:
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.

Keywords: Initial public offering, media, internet bubble

JEL Classifications: E32, G12, G14, G24, G30

Accepted Paper Series

Date posted: September 04, 2007 ; Last revised: September 16, 2009

Suggested Citation

Bhattacharya , Utpal, Yu, Xiaoyun, Galpin, Neal E. and Ray, Rina, The Role of the Media in the Internet IPO Bubble. Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1010744

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Contact Information

Xiaoyun Yu (Contact Author) Indiana University Bloomington - Department of Finance ( email ) 1309 E. 10th St. Bloomington, IN 47405 United States 812-855-3521 (Phone) 812-855-5875 (Fax)
China Academy of Financial Research (CAFR) 1954 Huashan Road Shanghai P.R.China, 200030 China
Utpal Bhattacharya Indiana University Bloomington - Department of Finance ( email ) 1309 E. 10th St. Bloomington, IN 47405 United States 812-855-3413 (Phone) 812-855-5875 (Fax) HOME PAGE: http://www.kelley.iu.edu/ubhattac/
Neal E. Galpin Texas A&M University - Department of Finance ( email ) College Station, TX 77843-4218 United States
Rina Ray Norwegian School of Economics and Business Administration (NHH) ( email ) Helleveien 30 Bergen NO-5045 Norway + 47 55 95 95 03 (Phone)