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Wall Street and Silicon Valley: A Delicate Interaction

Author

Listed:
  • George-Marios Angeletos
  • Guido Lorenzoni
  • Alessandro Pavan

Abstract

Entrepreneurs and venture capitalists are concerned about investors’ beliefs in asset markets because these beliefs shape the value of a potential IPO and the possibility to expand. Investors’ beliefs, on the other hand, can be influenced by start-up activity insofar as the latter contains valuable information about eventual profitability. This two-way feedback is shown to generate excessive, non-fundamental, waves in start-up activity, IPOs, and asset prices. Policies that “lean against the wind” can improve welfare, without requiring an informational advantage by the government.

Suggested Citation

  • George-Marios Angeletos & Guido Lorenzoni & Alessandro Pavan, 2023. "Wall Street and Silicon Valley: A Delicate Interaction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(3), pages 1041-1083.
    • Handle: RePEc:oup:restud:v:90:y:2023:i:3:p:1041-1083.
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    File URL: http://hdl.handle.net/10.1093/restud/rdac043
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. “Wall Street and Silicon Valley: A Delicate Interaction,” G.-M. Angeletos, G. Lorenzoni & A. Pavan (2012)
      by afinetheorem in A Fine Theorem on 2014-03-06 17:22:41

    More about this item

    Keywords

    Beauty contests; IPO waves; Hot IPO effects; Mis-pricing; Heterogeneous beliefs; Information-driven complementarities; Volatility; Inefficiency;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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