Dotcom Price Spiral

Antonio Gledson de Carvalho, Roberto Pinheiro and Joelson Oliveira Sampaio

No 1713, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G14 G24 L1 O33 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2017-07-25
New Economics Papers: this item is included in nep-fmk and nep-pay
Note: This paper is one of 2 originally posted as WP 16-33 in December 2016 and titled “The Dotcom Bubble and Underpricing: Conjectures and Evidence.” The original paper (WP 16-33) was split into 2 articles: this one (WP 17-13) and WP 17-14.
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DOI: 10.26509/frbc-wp-201713

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