Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar


  • Gur Huberman,

  • Tomer Regev

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    • Columbia University, Graduate School of Business. We are grateful to Tim McCormick, Arthur Small, seminar participants at Cornell, Yale, and Columbia Universities, a referee and the editor, René Stulz, for helpful comments.


A Sunday New York Times article on a potential development of new cancer-curing drugs caused EntreMed's stock price to rise from 12.063 at the Friday close, to open at 85 and close near 52 on Monday. It closed above 30 in the three following weeks. The enthusiasm spilled over to other biotechnology stocks. The potential breakthrough in cancer research already had been reported, however, in the journal Nature, and in various popular newspapers (including the Times) more than five months earlier. Thus, enthusiastic public attention induced a permanent rise in share prices, even though no genuinely new information had been presented.