Do IPOs affect the prices of other stocks? evidence from emerging markets

Matías Braun; Borja Larrain

doi:10.1093/rfs/hhn025

Do IPOs affect the prices of other stocks? evidence from emerging markets

Matías Braun, Borja Larrain^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

47 Scopus citations

Abstract

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. (JEL G12, G14, G15).

Original language	English
Pages (from-to)	1505-1544
Number of pages	40
Journal	Review of Financial Studies
Volume	22
Issue number	4
DOIs	https://doi.org/10.1093/rfs/hhn025
State	Published - Apr 2009
Externally published	Yes

Keywords

Demand curves
Investor protection
Financial-markets
Equity markets
Cross-section
Asset prices
Returns
Information
Industry
Integration

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10.1093/rfs/hhn025

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abstract = "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. (JEL G12, G14, G15).",

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AB - 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. (JEL G12, G14, G15).

KW - Demand curves

KW - Investor protection

KW - Financial-markets

KW - Equity markets

KW - Cross-section

KW - Asset prices

KW - Returns

KW - Information

KW - Industry

KW - Integration

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Do IPOs affect the prices of other stocks? evidence from emerging markets

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Keywords

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