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

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  • Matias Braun
  • Borja Larrain

Abstract

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.

Suggested Citation

  • Matias Braun & Borja Larrain, 2005. "Supply matters for asset prices: evidence from IPOs in emerging markets," Working Papers 06-4, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:06-4
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    1. Fatma Bouattour, 2020. "Measuring financial constraints of Brazilian industries: Rajan and Zingales index revisited," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 29(6), pages 677-710, August.
    2. Michael Nwogugu, 2020. "Regret Theory And Asset Pricing Anomalies In Incomplete Markets With Dynamic Un-Aggregated Preferences," Papers 2005.01709, arXiv.org.

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    Keywords

    Asset pricing; Going public (Securities);

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