Abstract
AbstractWe document a high‐profile instance of mispricing that is puzzling given the gradual information diffusion hypothesis and the lack of obvious limits to arbitrage. An internet search in 2008 led to a story about United Airlines’ 2002 bankruptcy being re‐released as ‘news’. This resulted in United Airlines losing 73 per cent of its value and caused a $4.2 billion decline in the value of airline stocks and United Airlines suppliers. The incorrect bankruptcy ‘news’ was quickly retracted, which led to a rebound in other airline and supplier firms, but the stock price of United Airlines was adversely affected for 4 days.
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