The price effects of index additions: A new explanation
AbstractWe further explore a new volatility explanation for the permanent price effect of index additions, using a sample of changes in the Nikkei 225. Additions to the index elicit significant price hikes, which tend to be permanent despite temporary price reversals. Meanwhile, investor awareness and demand increase, while price volatility decreases for the added stocks, contrary to the higher price volatility for stocks added to the S&P 500. Moreover, multivariate regression analysis demonstrates that the lower volatility contributes significantly to the permanent price boost, a new explanation; so does the higher investor awareness, consistent with the prior literature.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 63 (2011)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/jeconbus
Nikkei 225; Additions; Price effects; Explanations; Price volatility;
Find related papers by JEL classification:
- 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
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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- Azevedo, Alcino & Karim, Mohamad & Gregoriou, Andros & Rhodes, Mark, 2014. "Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 20-35.
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