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The effect of additions to or deletions from the TSE 300 Index on Canadian share prices

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Author Info

  • Isidore Masse
  • Robert Hanrahan
  • Joseph Kushner
  • Felice Martinello

Abstract

In this paper we examine shares that have been added to or deleted from the TSE 300 Index to determine whether abnormal price movements have occurred. We apply the dummy variable approach to event study methodology and adjust the estimated standard errors for arbitrary heteroscedasticity and clustering of events. We also use a non-parametric method of inference. Like authors of U.S. studies, we find that the market reacts positively to inclusion and negatively to deletion, albeit not significantly in the latter case. The information content of inclusion does not account for the entire share price response, lending support to the hypothesis of increased purchases by index funds.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 33 (2000)
Issue (Month): 2 (May)
Pages: 341-359

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Handle: RePEc:cje:issued:v:33:y:2000:i:2:p:341-359

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Cited by:
  1. Massa, Massimo & Peyer, Urs & Tong, Zhenxu, 2005. "Limits of Arbitrage and Corporate Financial Policy," CEPR Discussion Papers 4829, C.E.P.R. Discussion Papers.
  2. Sascha Wilkens & Jens Wimschulte, 2005. "Price and Volume Effects Associated with 2003’s Major Reorganization of German Stock Indices," Financial Markets and Portfolio Management, Springer, vol. 19(1), pages 61-98, June.
  3. Daniel Pullen & Gerard Gannon, 2007. "The Index Effect: An Investigation of the Price, Volume and Trading Effects Surrounding Changes to the S & P Australian Indices," Accounting, Finance, Financial Planning and Insurance Series 2007_07, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  4. Yun, Jooyoung & Kim, Tong S., 2010. "The effect of changes in index constitution: Evidence from the Korean stock market," International Review of Financial Analysis, Elsevier, vol. 19(4), pages 258-269, September.
  5. Adrian Wai Kong Cheung, 2011. "Do Stock Investors Value Corporate Sustainability? Evidence from an Event Study," Journal of Business Ethics, Springer, vol. 99(2), pages 145-165, March.

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