Resumo de Contagious Speculation And A Cure For Cancer: A Nonevent That Made Stock Prices Soar(5)

Frequency of Extreme Returns and Comovements of Returns of Members of the NASDAQ Combined Biotechnology Index Companies.Number of firm-days on which very high or very low daily returns (R) were realized for members of the NASDAQ Combined Biotechnology Index in 1996 and 1997. Total number of firm-days in the sample is 56,800, distributed over 507 trading days. Nor example, in 1996 and 1997 there was only one day when three members of the NASDAQ Combined Biotechnology Index experienced a daily Return above 25 percent.
To assess how permanent the price changes of the seven stocks were, we look at the returns of a value-weighted portfolio of the seven stocks for the week and two weeks beginning on Friday, May 1. These returns were 35 percent and 27 percent, respectively. Thus, more than a third of the 75 percent value-weighted May 4 return on these 7 stocks did not disappear for at least 2 weeks. In dollar terms, May 4 saw the 7 stocks appreciate in value by $185 million, and $66 million of this appreciation did not disappear until Friday, May 15.To appreciate the challenge of detecting contagion and comparing stock price movements in response to news and to no news, it is worth looking at the stock price of Bristol-Myers Squibb (BMY), a very big firm and a likely beneficiary of ENMD's success if it materializes.Table II focuses on four important days and reports BMY's returns, excess returns, trading volume, relative trading volume, and the frequency of observing such numbers or larger in 1996 and 1997. February 10, 1999, is included because on the previous evening both ENMD and BMY announced a modification of the research agreement between the two companies regarding Angiostatin, and on that day ENMD's stock price dropped from 24.5 to 12.875.Table II suggests that only May 4 was unusual for BMY's stock. Its trading volume soared, and its return was 3.12 percent, much higher than the NYSE's 0.14 percent return on that day. Although that return is marginally unusual compared with BMY's daily excess returns in 1996 and 1997, it amounts to a $3.3 billion appreciation in the company's market capitalization-more than four times the dollar appreciation in ENMD and the seven bio-tech stocks with the highest return on that day combined. A search in the ABI Inform database suggests the absence of other significant news directly relevant to BMY on May 2, 3, or 4. Therefore one could attribute at least part of BMY's price rise on May 4 to the Times article of the previous day. On the whole, then, we can rule out BMY's price reaction on days when new.

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