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The Effects of Index Changes on Stock Trading: Evidence from the EGX

Author

Listed:
  • Neveen Ahmed

    (School of Business, The American University in Cairo, AUC Avenue, New Cairo 11835, Cairo, EGYPT)

  • Aliaa Bassiouny

    (School of Business, The American University in Cairo, AUC Avenue, New Cairo 11835, Cairo, EGYPT)

Abstract

We examine the effects on firm price, volume and liquidity following changes in the composition of the Egyptian Stock Exchange main market index EGX30 over the period 2005- 2015. The indexing methodology of the EGX30 is independent from performance criteria and allows us to test competing hypothesis that explain behaviors accompanying index changes. We find an asymmetric effect on deleted versus added firms supporting the downward slopping and investor awareness hypothesis. Firms added to the index experience significant price increases in the run-up window, trading volume effects in the run up and post change windows and enhanced liquidity which are not reversed in the post change period. Price and liquidity effects are not evident in deleted firms.

Suggested Citation

  • Neveen Ahmed & Aliaa Bassiouny, 2018. "The Effects of Index Changes on Stock Trading: Evidence from the EGX," Review of Economics & Finance, Better Advances Press, Canada, vol. 11, pages 55-66, February.
    • Handle: RePEc:bap:journl:180105
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    References listed on IDEAS

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    More about this item

    Keywords

    Abnormal return; Abnormal volume; Liquidity; Index change;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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