TAILIEUCHUNG - Fifteen Minutes of Fame? The Market Impact of Internet Stock Picks

Our study is part of a recent literature that investigates the asset pricing impact of behavioral biases documented in psychology research. This literature, which has expanded significantly over the last decade, is comprehensively reviewed by Hirshleifer (2001) and Shiller (2000). The strand of the literature closest to this paper investigates the effect of investor mood on asset prices. The two principal approaches in this work link returns either to a single event or to a continuous variable that impacts mood. . | Fifteen Minutes of Fame The Market Impact of Internet Stock Picks Peter Antunovich and Asani Sarkar Federal Reserve Bank of New York Staff Reports no. 158 January 2003 JEL classification G10 G14 Abstract We examine 120 Nasdaq and Over-the-Counter buy recommendations made by Internet sites from April 1999 to June 2001. The stock picks show substantial short- and long-run price and liquidity gains although no new information is revealed about them. For example liquidity one year after the pick day remains higher for these stocks than for a sample matched according to size book-to-market value and liquidity in the preceding year. In addition after controlling for fundamental and microstructure factors we find that stocks with lower initial liquidity have greater improvements in liquidity on the pick day. Further stocks with lower initial liquidity and higher pick-day liquidity have higher pick-day excess returns. These results suggest that stocks have multiple liquidity equilibria and that the stock picks by coordinating uninformed trading activity push initially illiquid stocks to a higher liquidity equilibrium. Finally we find that stocks with higher initial media exposure enjoy greater liquidity gains and lower excess returns on the pick day. Antunovich Morgan Stanley Dean Witter Co. New York . e-mail peter a@ Sarkar Research and Market Analysis Group Federal Reserve Bank of New York New York . e-mail . The authors thank the following for comments Jonathan Berk Larry Glosten Charlie Himmelberg Prem Jain Charles Jones Jim Mahoney Marco Pagano Lubos Pastor Bob Schwartz Rene Stulz Dimitri Vayanos Ingrid Werner and seminar participants at the American Finance Association Meetings in 2003 the Federal Reserve Bank of New York and Rutgers University. We thank Michael Emmet and Priya Gandhi for excellent research assistance. The views expressed in the paper are those of the authors and do not necessarily reflect the position of the .

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