Dotcom Price Spiral

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: 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