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Asymmetric stock price and investor awareness reactions to changes in the Nasdaq 100 index

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  • Ernest N. Biktimirov

    (Brock University)

  • Yuanbin Xu

    (Brock University)

Abstract

We examine market responses to changes in the Nasdaq 100 index membership and find asymmetric stock price and investor awareness reactions. Stocks added to the Nasdaq 100 index for the first time experience permanent price gains and significant increases in investor awareness, whereas repeated additions and new deletions exhibit temporary stock price changes and no significant changes in investor awareness. Stock liquidity improves for new additions and repeated additions but worsens for new deletions. Importantly, investor awareness proxies are significantly related to cumulative abnormal returns around the Nasdaq 100 reconstitution even in the presence of liquidity and other controlling factors. Taken together, the observed results are consistent with the investor awareness hypothesis.

Suggested Citation

  • Ernest N. Biktimirov & Yuanbin Xu, 2019. "Asymmetric stock price and investor awareness reactions to changes in the Nasdaq 100 index," Journal of Asset Management, Palgrave Macmillan, vol. 20(2), pages 134-145, March.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:2:d:10.1057_s41260-019-00108-6
    DOI: 10.1057/s41260-019-00108-6
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    More about this item

    Keywords

    Abnormal return; Event study; Index changes; Investor awareness; Liquidity; Nasdaq 100 index;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • 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

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