Do Ipos Affect the Prices of Other Stocks? Evidence from Emerging Markets
Posted: 23 Mar 2009 Last revised: 4 May 2012
Date Written: April 1, 2009
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.
Keywords: G12, G14, G15
Suggested Citation: Suggested Citation