Does the Media Help or Hurt Retail Investors During the IPO Quiet Period?

57 Pages Posted: 29 Apr 2018 Last revised: 27 Aug 2019

See all articles by Brian J. Bushee

Brian J. Bushee

University of Pennsylvania - The Wharton School

Matthew C. Cedergren

Santa Clara University

Jeremy Michels

University of Pennsylvania - Accounting Department

Date Written: August 26, 2019

Abstract

We examine how the media influences retail trade and market returns during the “quiet period” that follows a firm’s IPO. We find that more media coverage during this period is associated with more purchases by retail investors and that such purchases are attention-driven, rather than information-based. Further, these retail trades are negatively associated with stock returns at the firm’s first earnings announcement post-IPO. Our results suggest that media coverage, combined with market frictions that limit price efficiency in the post-IPO period, leads to worse investing outcomes for retail investors.

Keywords: Media, Retail Investors, Retail Trade, Initial Public Offering, IPO, Quiet Period, Individual Investors, Investor Attention

JEL Classification: G11, G14, G24, M48

Suggested Citation

Bushee, Brian J. and Cedergren, Matthew C. and Michels, Jeremy, Does the Media Help or Hurt Retail Investors During the IPO Quiet Period? (August 26, 2019). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3160949 or http://dx.doi.org/10.2139/ssrn.3160949

Brian J. Bushee

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-4872 (Phone)
215-573-2054 (Fax)

Matthew C. Cedergren

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Jeremy Michels (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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