Additions to Market Indices and the Comovement of Stock Returns Around the World
AbstractUsing newly-constructed data covering the last decade, we document that, in most of forty markets, when added to the main index, firms’ returns experience an increase in comovement with the rest of the index, reflected in higher beta and greater explanatory power of the market return. Stock turnover and analyst coverage also typically increase upon inclusion. Using various tests, we find the demand-based view of comovement (the category/habitat theories of Barberis, Shleifer and Wurgler, 2005) to provide a good explanation for many of our findings. Some results, though, suggest that information-related factors are also important in explaining the increased comovement.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/47.
Date of creation: 01 Mar 2011
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Other versions of this item:
- Claessens, Stijn & Yafeh, Yishay, 2008. "Additions to Market Indices and the Comovement of Stock Returns around the World," CEPR Discussion Papers 7052, C.E.P.R. Discussion Papers.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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