Supply Matters for Asset Prices: Evidence from Ipos in Emerging Markets

38 Pages Posted: 8 Mar 2006 Last revised: 25 Feb 2008

See all articles by Matías Braun

Matías Braun

Universidad Adolfo Ibanez

Borja Larrain

Pontificia Universidad Catolica de Chile

Date Written: December 2005

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.

JEL Classification: G11, G14, G15

Suggested Citation

Braun, Matias and Larrain, Borja, Supply Matters for Asset Prices: Evidence from Ipos in Emerging Markets (December 2005). FRB of Boston Working Paper No. 06-4. Available at SSRN: https://ssrn.com/abstract=887532 or http://dx.doi.org/10.2139/ssrn.887532

Matias Braun

Universidad Adolfo Ibanez ( email )

Diagonal Las Torres 2640 Peñaleón
Presidente Errázuriz 3485 Las Condes
Santiago, 794-1169
Chile

HOME PAGE: http://www.matiasbraun.com

Borja Larrain (Contact Author)

Pontificia Universidad Catolica de Chile ( email )

Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile

HOME PAGE: http://economiayadministracion.uc.cl/personal/blarrain/

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