Do IPOs Affect the Prices of Other Stocks? Evidence from Emerging Markets

We show that the introduction of a large asset permanently affects the prices of existing assets in a market. Using data from 254 initial public offerings (IPOs) in 22 emerging markets, we find that portfolios that covary highly with the IPO experience a decline in prices relative to other portfolio...

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Bibliographic Details
Published in:The Review of financial studies 2009-04, Vol.22 (4), p.1505-1544
Main Authors: Braun, Matías, Larrain, Borja
Format: Article
Language:English
Subjects:
Arbitrage
Central banks
Covariance
Emerging markets
Financial portfolios
Food industries
Industrial market
Initial public offering
Initial public offerings
International capital market
Investors
Market prices
Market segments
Portfolio performance
Securities prices
Stock exchange
Stock prices
Stock returns
Stocks
Studies
Supply
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Summary:We show that the introduction of a large asset permanently affects the prices of existing assets in a market. Using data from 254 initial public offerings (IPOs) in 22 emerging markets, we find that portfolios that covary highly with the IPO experience a decline in prices relative to other portfolios during the month of the issue. The effects are stronger when the IPO is issued in a market that is less integrated internationally and when the IPO is bigger. This evidence is consistent with the idea that shocks to asset supply have a significant effect on asset prices
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhn025