Primary Capital Market Transactions and Index Funds
Abstract
Abstract We document how mechanical buying by CRSP-index-tracking funds 5 days post-IPO affects stock returns and IPO deal structure. Using a difference-in-differences design, we show that expected indexer demand causes Fast-Track IPOs to outperform their non-Fast-Track counterparts by over five percentage points, peaking at the index inclusion date and reverting significantly within 3 weeks. Anticipated CRSP index inclusion also affects IPO terms, with Fast-Track IPOs raising 6% more capital than their non-Fast-Track counterparts. Our findings support a proposed index rule change to eliminate a $5.8 billion “shadow tax” paid to intermediaries by index fund investors and firms raising capital through IPOs. (JEL G12, G14)
Fields of Study & Subjects
Financial Markets and Investment Strategies
Corporate Finance and Governance
Auditing
Earnings Management
Governance
Publication details
- Journal / source
- The Review of Asset Pricing Studies
- Volume
- 16
- Issue
- 2
- Pages
- 163–202
- Publication date
- 6 January 2026
- Language
- EN