Does the Media Help or Hurt Retail Investors During the IPO Quiet Period?

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.

Keywords: Media, Retail Investors, Retail Trade, Initial Public Offering, IPO, Quiet Period, Individual Investors, Investor Attention

JEL Classification: G11, G14, G24, M48