Cash to Spend: IPO Wealth and House Prices

Abstract

This study empirically demonstrates the impact of wealth shocks from initial public offerings (IPOs) on local house prices by distinguishing from changes in the uncertainty and availability of wealth. Applying spatial event study methods to IPOs in California from 1993 to 2017, we find increases in house prices around filing and issuing dates. Upon lockup expiration, house price changes depend on post-issuance returns. Treating the San Francisco Bay as a natural commuting barrier, we use a difference-in-differences approach to identify sustained price increases in markets with recent IPO filings and temporary increases for recent issuing and lockup expiration.

Keywords: Initial Public Offerings, Housing Value, Hedonic Regression, Wealth Effects, Liquidity Constraints, Executive Compensation

JEL Classification: L26, M12, J33, R21