Braun, M., & Larrain, B. (2008). Do IPOs affect the prices of other stocks? Evidence from emerging markets

Braun, M., & Larrain, B. (2009). Do IPOs affect the prices of other stocks? Evidence from emerging markets. The Review of Financial Studies, 22(4), 1505-1544.

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.