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

Braun M., Larraín B.

2009 | Braun M., Larraín, B.

Review of Financial Studies

IF : 3,551 |

AI : 6,318

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 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.

Artículo: ISI , Finanzas