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

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

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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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
Contact details of provider: Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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