Does the media help or hurt retail investors during the IPO quiet period?
Matthew Cedergren, Assistant Professor of Accounting
Brian Bushee, Matthew Cedergren, Jeremy Michels, Does the media help or hurt retail investors during the IPO quiet period?, Journal of Accounting and Economics, Volume 69, Issue 1, 2020, 101261, ISSN 0165-4101, https://doi.org/10.1016/j.jacceco.2019.101261.
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.