Wall Street and Silicon Valley: A Delicate Interaction

George-Marios Angeletos, Guido Lorenzoni () and Alessandro Pavan

The Review of Economic Studies, 2023, vol. 90, issue 3, 1041-1083

Abstract: Entrepreneurs and venture capitalists are concerned about investors’ beliefs in asset markets because these beliefs shape the value of a potential IPO and the possibility to expand. Investors’ beliefs, on the other hand, can be influenced by start-up activity insofar as the latter contains valuable information about eventual profitability. This two-way feedback is shown to generate excessive, non-fundamental, waves in start-up activity, IPOs, and asset prices. Policies that “lean against the wind” can improve welfare, without requiring an informational advantage by the government.

Keywords: Beauty contests; IPO waves; Hot IPO effects; Mis-pricing; Heterogeneous beliefs; Information-driven complementarities; Volatility; Inefficiency; C72; D62; D82 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Wall Street and Silicon Valley: A Delicate Interaction (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:90:y:2023:i:3:p:1041-1083.

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