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Dotcom Price Spiral

26 Pages Posted: 9 Aug 2017  

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo

Roberto Pinheiro

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Joelson Oliveira Sampaio

Getulio Vargas Foundation (FGV), Sao Paulo School of Economics, Students

Date Written: July 25, 2017

Abstract

We show that during the bubble implied growth rates coming from the underpricing of IPO market explains short term returns on the NASDAQ index. This result remains even if we replace actual underprice for others different instruments for underpricing that are based on predetermined variables and not correlated to market returns. We also do placebo tests to assess the relation between underpricing and NASDAQ returns over other periods. We show that growth proxies that are not contaminated by the booms and busts of the stock market are uncorrelated with the returns on the NASDAQ index in periods outside the bubble.

Keywords: Internet bubble, underpricing, spinning, analyst lust, risk composition hypothesis

JEL Classification: G14, G24, L1, O33

Suggested Citation

De Carvalho, Antonio Gledson and Pinheiro, Roberto and Sampaio, Joelson Oliveira, Dotcom Price Spiral (July 25, 2017). FRB of Cleveland Working Paper No. 17-13. doi/10.26509/wp-201713.. Available at SSRN: https://ssrn.com/abstract=3015295

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo ( email )

R. Itapeva, 474 - 7o. andar
Sao Paulo 01313-902
Brazil
+5511 3281-7767 (Phone)

Roberto Pinheiro (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Joelson Sampaio

Getulio Vargas Foundation (FGV), Sao Paulo School of Economics, Students ( email )

Rua Itapeva 474 s.1202
São Paulo
Brazil

HOME PAGE: http://eesp.fgv.br/

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