Contagious speculation and cancer (a case of behavioural finance)

This slide examines the media impact on the stock prices with the case of new york. It shows how a simple news which is actually not true, can eventually impact the price of a stock of a company and also indicates how the investors actually reacts. it is a part where we have shown the behaviour of the investors when they want to invest in a stock. how they react to a news to that related stock while investing into that.

1. Contagious Speculation and Cancer Examines media impact on stock prices.

2. SL No. ID Name 1. M230203026 Sharmin Akter Sathi 2. M230203031 Maisha Fahmida Ria 3. M230203033 Shakil Ahmed 4. M230203048 Md. Naeem ul Fahim 5. M230203050 Mohammad Abdul Aziz 6. M230203051 Afia Fariha 7. M230203060 Farjana Akter Eti 8. M230203068 Afia Saiara Group Members

3. The EntreMed Case Public Attention Public attention led to price rise. Information Origin Reported months earlier in Nature. May 3, 1998 NYT article caused stock to soar.

4. Article Objectives: E xamine the impact of media coverage, specifically a non-news event, on stock prices. A ssess whether stock prices can be heavily influenced by public attention and optimistic speculation rather than new, fundamental information. A nalyze the behavioral and informational dynamics in security markets, particularly within the biotechnology sector. Authors: Gur Huberman and Tomer Regev

5. Hypothesis vs. Reality Efficient Markets Price changes linked to new information. Financial Economics Asset price reflects future cash flows. Study Questions Does price reflect solid information?

6. Key Events November 1998 Stock price decline reported failures. May 1998 Significant stock price increase. November 1997 Modest stock price increase.

7. Contagion Effect November 1997 Muted reaction when news broke. Seven Stocks Returns exceeding twenty five percent. Nasdaq Index Index rose significantly May 4, 1998. contagion effect refers to the phenomenon where market reactions or investor sentiment in response to news or events in one company or sector spread to other companies or sectors, causing widespread price movements

8. Data and Methodology Collected data: CRSP Data, SEC Filings, TAQ Data Authors collected data of stock price around major event days, and their focus on specific days and stock behaviors . Analyzed stock returns, trading volumes, and the reactions of both ENMD and other biotech stocks in response to news events

9. Stock Pricing Analysis Elevated Price Stock price remained elevated. May 4 Surge Surge was disproportionate. Price Movements Major price movements occurred.

10. Biotechnology Firms Impact BMY Analyzed Potential beneficiary of ENMD success. Price Movements Movements in biotechnology stocks. Nasdaq Index Examined Nasdaq Biotechnology Index.

11. Bristol-Myers Analysis Spillover Effect Suggests a spillover from publicity. No Specific News Increase not associated with news. Volume Increase Increase in trading volume.

12. Data Analysis Methods: Computation of abnormal returns surrounding specific news/events. Comparative analysis of stock price reactions across different events. Evaluation of trading volume spikes as indicators of market attention. Observing long-term price trends to distinguish between temporary and permanent responses. Contextual analysis contrasting fundamental expectations with observed market behaviors

13. Future Research Recommendations A need for more research into other instances where market reactions may be driven by non-fundamental factors as circumstances exploited in this case are rare and unlikely to be repeated Further investigation on those particular sectors where n ews and perceptions can significantly impact valuations. Exploring the mechanisms through which information dissemination and investor psychology that contribute to stock price.

14. Concluding Remarks Arbitrary Allocation Potentially leading to arbitrary allocation. Stock Prices Influenced by factors other than fundamentals. Stock Price Rise Caused by publicity, not new information.