The Role of the Media in the Internet IPO Bubble
2009, Journal of Financial and Quantitative Analysis
Utpal Bhattacharya, Neal Galpin, Rina Ray, Xiaoyun Yu
We read all news items that came out between 1996 through 2000 on all 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 this media hype is unable to explain the internet bubble: there was a 1646% difference in returns between the two groups from January 1, 1997 through March 24, 2000 (the market peak), and the media can explain only 2.9% of that.
Bhattacharya, Utpal, Neal Galpin, Rina Ray, and Xiaoyun Yu (2009), “The Role of the Media in the Internet IPO Bubble,” Journal of Financial and Quantitative Analysis, Vol. 44, No. 3, June, pp. 657-682.