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Changing the methodology of equity indices—The case of the Tel-Aviv Stock Exchange

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  • Levy, Tamir
  • Yagil, Joseph

Abstract

This study investigates the impact of a change in the methodology of constructing a stock index on the stability of a stock exchange. In July 2010, the Tel Aviv Stock Exchange changed the criteria for the construction of five of its indices. Using data from these five stock indices for the years 2009–2011, we find that the reform increased the quality of all five indices. The liquidity of the indices increased, the volatility of their returns decreased, and their mean return remained unchanged.

Suggested Citation

  • Levy, Tamir & Yagil, Joseph, 2013. "Changing the methodology of equity indices—The case of the Tel-Aviv Stock Exchange," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 91-99.
  • Handle: RePEc:eee:intfin:v:26:y:2013:i:c:p:91-99
    DOI: 10.1016/j.intfin.2013.04.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Equity indices; Liquidity ratio; Market indices quality; Stability of stock exchange;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • 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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