The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings

81 Pages Posted: 21 Jun 2018 Last revised: 12 Sep 2019

See all articles by Jongsub Lee

Jongsub Lee

University of Florida - Warrington College of Business Administration

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Donghwa Shin

University of North Carolina at Chapel Hill, Kenan-Flagler Business School

Date Written: May 1, 2019

Abstract

Certification by online analysts and early investors can generate excitement among potential token investors, leading to successful initial coin offerings (ICOs). We test the general notion of "wisdom of crowds" using novel data on nearly 3,400 ICOs, including sequential investor subscriptions during token sales. We find that favorable analyst opinions on the underlying projects are associated with aggressive initial token subscriptions, fundraising success, and exchange listing. Analyst ratings also predict long-run token performance. Our results hold during the ICO market's boom-and-bust cycle. Overall, our results suggest analysts' intermediary role in ICOs, a type of direct placement in the FinTech era.

Keywords: ICO, FinTech, Wisdom of Crowds, Information Cascade, Fundraising Success, Underpricing, Long-run Performance

JEL Classification: L26, G14, D81, D82, D83, G12

Suggested Citation

Lee, Jongsub and Li, Tao and Shin, Donghwa, The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings (May 1, 2019). Available at SSRN: https://ssrn.com/abstract=3195877 or http://dx.doi.org/10.2139/ssrn.3195877

Jongsub Lee

University of Florida - Warrington College of Business Administration ( email )

Department of Finance Insurance & Real Estate
P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-273-4966 (Phone)
352-392-0301 (Fax)

Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Donghwa Shin

University of North Carolina at Chapel Hill, Kenan-Flagler Business School ( email )

300 Kenan Center Drive
Chapel Hill, NC 27599
United States
6096137699 (Phone)

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