Do IPOs Affect the Prices of Other Stocks ? Evidence from Emerging Markets
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Date
2009
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Publisher
OXFORD UNIV PRESS INC
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.
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Keywords
G12, G14, G15, DEMAND CURVES, INVESTOR PROTECTION, FINANCIAL-MARKETS, EQUITY MARKETS, CROSS-SECTION, ASSET PRICES, RETURNS, INFORMATION, INDUSTRY, INTEGRATION