Do demand or supply shocks which are not accompanied by new information affect prices? If so, is the price effect temporary ("price pressure hypothesis") or permanent ("imperfect substitutes hypothesis")? Numerous empirical studies have dealt with these questions and yet the issue is still unresolved. This paper provides new evidence from Germany. Until 2009 capital gains were taxed when they were realized within a "speculative period" but not when they were realized after the end of that period. Using a sample of more than 200 IPOs that traded above the offer price at the end of the speculative period we find that a) trading volume increases significantly at the end of the speculative period and b) prices decline significantly. There is no indication of a price reversal. This is consistent with the imperfect substitutes hypothesis but inconsistent with the price pressure hypothesis.
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