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Effects of a Change in the Composition of IMKB 30 on Stock Performance

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  • Baris Teke
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    Abstract

    A total of 60 incidents, of which 29 were additions to and 31 were exclusions from the index have been analyzed during the 23 index periods of ÝMKB 30 between the years 2005-2011. General conclusion is that announcements of change and the days of change do not have a significant impact on stock returns and transaction volumes during the period of analysis. It has been observed that additions to the index increase the transaction volume more than exclusions from it. It is believed that the investors predict the stocks that would be added to (excluded from) the index and adjust the prices accordingly before the change occurs. Besides, the effects of institutional investors that make transactions based on the index, including exchange traded funds, are limited. Effects of a change in index composition have been observed to be limited on the days of announcement and actual change and it is believed that the market has semi-strong form of efficiency. No proof could be identified on the validity of Price Pressure Hypothesis, Imperfect Substitutes Hypothesis or other hypotheses.

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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/isereview51.pdf
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    Bibliographic Info

    Article provided by Research and Business Development Department, Borsa Istanbul in its journal Istanbul Stock Exchange Review.

    Volume (Year): 13 (2013)
    Issue (Month): 51 (April)
    Pages: 21-57

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    Handle: RePEc:bor:iserev:v:13:y:2013:i:51:p:21-57

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    Related research

    Keywords: ÝMKB 30 (ISE 30); market model; event study methodology; index composition; index changes; price and volume effects; efficient market hypothesis;

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    1. Sophocles N. Brissimis & Thomas Vlassopoulos, 2007. "The Interaction between Mortgage Financing and Housing Prices in Greece," Working Papers 58, Bank of Greece.
    2. Ricardo Gimeno & Carmen Martínez-Carrascal, 2006. "The interaction between house prices and loans for house purchase. The Spanish case," Banco de Espa�a Working Papers 0605, Banco de Espa�a.
    3. Nazif Durmaz, 2011. "Housing Prices and Fundamentals: The Role of a Supply Shifter," Economics Bulletin, AccessEcon, vol. 31(3), pages 2468-2479.
    4. Peter Abelson & Roselyne Joyeux & George Milunovich & Demi Chung, 2005. "Explaining House Prices in Australia: 1970-2003," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages S96-S103, 08.
    5. Carliner, Geoffrey, 1973. "Income Elasticity of Housing Demand," The Review of Economics and Statistics, MIT Press, vol. 55(4), pages 528-32, November.
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