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Supply matters for asset prices: evidence from IPOs in emerging markets

  • Matías Braun
  • Borja Larrain

We show that the introduction of a new asset affects the prices of previously existing assets in a market. Using data from 254 IPOs in emerging markets, we find that stocks in industries that covary highly with the industry of the IPO experience a larger decline in prices relative to other stocks during the month of the IPO. The effects are stronger when the IPO is issued in a market that is less integrated internationally, and when the IPO is big. The evidence supports the idea that the composition of asset supply affects the cross-section of stock prices.

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Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 06-4.

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Date of creation: 2005
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Handle: RePEc:fip:fedbwp:06-4
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