Effect of attention on returns of initial public offerings

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bachelor_Ahlroos_Juuso_2019.pdf (720.03 KB)

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School of Business | Bachelor's thesis
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Date

2019

Department

Rahoituksen laitos

Major/Subject

Mcode

Degree programme

Rahoitus

Language

en

Pages

23

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Abstract

Findings show that during the week before initial public offering date the number of tweets mentioning the ticker of the firm increases significantly compared to previous weeks. The increase in tweets has a significant positive correlation with IPO first day performance. If stock faces upward price pressure not based on fundamentals, it should do worse in the long term and the increase in tweets before IPO also shows a significant negative effect on long term performance of stock during the year after IPO. These findings support the hypothesis that attention leads to short-term overperformance and long-term underperformance. This shows that number of tweets for Twitter can be used as a measure of attention in context of IPOs. In the end I propose two different strategies on when to take part in an IPO based on the change in Twitter mentions.

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Thesis advisor

Ungeheuer, Michael

Keywords

Attention, Initial public offering, IPO, Twitter

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https://urn.fi/URN:NBN:fi:aalto-201912296751

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[kand] Kauppakorkeakoulu / BIZ (Open Access)