From gold to silicon

This study examines the market reaction to a recent Australian phenomenon in which mining/resource companies announce an intention to become associated with a private Internet or technology company. We find that the average market adjusted continuous abnormal return to the companies in our sample is approximately 24% over the [−4,+1] window. With a simple adaptation to the event study methodology, we find the pattern of abnormal returns is consistent with the presence of a speculative bubble. We also find that the type of technology in which the company intends to invest determines the level of abnormal returns. Mining companies that have accessed the equity capital market prior to the announcement experience lower abnormal returns.