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

Abstract

A SundayNew York Timesarticle 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 journalNature, and in various popular newspapers (including theTimes) 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.