The Role of the Media in the Internet IPO Bubble

51 Pages Posted: 4 Sep 2007  

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

Neal Galpin

University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Rina Ray

University of Colorado at Denver

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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

Bhattacharya , Utpal and Yu, Xiaoyun and Galpin, Neal 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

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Xiaoyun Yu (Contact Author)

Indiana University - Kelley School of Business - 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

Neal E. Galpin

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Rina Ray

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States
303-315-8455 (Phone)

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