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Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI

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  • Azevedo, Alcino
  • Karim, Mohamad
  • Gregoriou, Andros
  • Rhodes, Mark

Abstract

We examine the stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005–2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because significant stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Our empirical findings can be explained by the market microstructure literature. Significant changes in liquidity cause trading volume and stock prices to reverse back to their original level before the index revisions took place.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:intfin:v:28:y:2014:i:c:p:20-35
    DOI: 10.1016/j.intfin.2013.10.001
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    Cited by:

    1. Lim, Kian-Ping & Thian, Tze-Chung & Hooy, Chee-Wooi, 2017. "Investor heterogeneity, trading account types and competing liquidity channels for Malaysian stocks," Research in International Business and Finance, Elsevier, vol. 41(C), pages 220-234.
    2. Amal Mohammed Al-Masawa & Rasidah Mohd-Rashid & Hamdan Amer Al-Jaifi, 2020. "A Descriptive Analysis of IPOs Post Listing Liquidity in Malaysia," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 171-180, January.
    3. Neveen Ahmed & Aliaa Bassiouny, 2018. "The Effects of Index Changes on Stock Trading: Evidence from the EGX," Review of Economics & Finance, Better Advances Press, Canada, vol. 11, pages 55-66, February.
    4. Lim, Kian-Ping & Thian, Tze-Chung & Hooy, Chee-Wooi, 2015. "Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels," MPRA Paper 67602, University Library of Munich, Germany.
    5. Qureshi, Fiza & Kutan, Ali M. & Ismail, Izlin & Gee, Chan Sok, 2017. "Mutual funds and stock market volatility: An empirical analysis of Asian emerging markets," Emerging Markets Review, Elsevier, vol. 31(C), pages 176-192.
    6. Batten, Jonathan A. & Lucey, Brian M. & Peat, Maurice, 2016. "Gold and silver manipulation: What can be empirically verified?," Economic Modelling, Elsevier, vol. 56(C), pages 168-176.

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    More about this item

    Keywords

    Index revision; Price effect; Liquidity effect; Volume effect;
    All these keywords.

    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

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