The Role of the Media in the Internet IPO Bubble

Bhattacharya , Utpal; Yu, Xiaoyun; Galpin, Neal; Ray, Rina

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The Role of the Media in the Internet IPO Bubble

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

51 Pages Posted: 4 Sep 2007

See all articles by Utpal Bhattacharya

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR)

Neal Galpin

Monash University - Department of Banking and Finance

Rina Ray

University of Colorado at Denver

There are 2 versions of this paper

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 Classification: E32, G12, G14, G24, G30

Suggested Citation: Suggested Citation

Bhattacharya, Utpal and Yu, Xiaoyun and 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: https://ssrn.com/abstract=1010744