Business/SPEA Information Commons

Indiana University Bloomington

Research study: Media has scant role in creating and bursting stock market bubbles

Posted by nlgiu on April 3, 2009

Media hype results in only short-term impact on stock market returns

FOR IMMEDIATE RELEASE
March 30, 2009

Editors: The paper discussed in this release is available for download at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1010744.

BLOOMINGTON, Ind. — The news media has little influence in propelling financial market bubbles or causing their meltdowns, and has only short-term effects on returns. This main finding of an analysis of media coverage and stock performance during the dot-com bubble refutes the current controversies on the issue, say researchers at Indiana University’s Kelley School of Business.

Between 1996 and early 2000, which was the peak of the bubble, “net news” — or good news minus bad news — was more positive for Internet Initial Public Offerings (IPOs) than for other types of IPOs by nearly two to one, while net news was far more negative for dot-com IPOs by almost four to one after the bubble burst in March 2000.

“During the Dot-Com Era, the media tended to be over-optimistic when prices were rising but over-pessimistic when prices were falling, a situation similar to the media hype over the past several years,” said Utpal Bhattacharya, associate professor of finance in the Kelley School and co-author of a study forthcoming in the Journal of Financial and Quantitative Analysis.  …

For the entire news release …. http://info.kelley.iu.edu/news/page/normal/10389.html

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: