Stay away from the media during quiet periods?

Does the media help or hurt retail investors during the IPO quiet period?

Brian Bushee (The Wharton School, University of Pennsylvania), Matthew Cedergren (The Wharton School, University of Pennsylvania) and Jeremy Michels (The Wharton School, University of Pennsylvania) study how the media may influence retail trades as well as market returns during the so-called “quiet period”, the first 25 calendar days after a firm’s IPO in the United States. More media coverage during this period is associated with more purchases by retail investors. Retail purchases seem to be attention driven and these retail trades are negatively associated with stock returns at the firm’s first earnings announcement after the IPO. The researchers’ findings suggest that the media coverage may lead to worse investing outcomes for retail investors.

Read full paper: Bushee, B., M. Cedergren, and J. Michels. 2019. “Does the media help or hurt retail investors during the IPO quiet period?” Journal of Accounting and Economics 69 (1)

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