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Analyst responses to stock-index adjustments: Evidence from MSCI Taiwan Index additions

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  • Tu, Chia-Jung
  • Chang, Yuanchen

Abstract

Using data from MSCI Taiwan Index adjustments, we study analyst responses to stock additions from 1999 to 2007. The empirical results show that the magnitudes of changes in analysts' earnings-per-share forecasts are similar to those of their two benchmarks for new additions to the index. Therefore, in our sample we find no significant information effect from the additions. We also find that the absolute forecast errors made by analysts are smaller for new additions and those foreign analysts are more accurate than local analysts. This finding demonstrates that new additions to the index exhibit significant performance improvements.

Suggested Citation

  • Tu, Chia-Jung & Chang, Yuanchen, 2012. "Analyst responses to stock-index adjustments: Evidence from MSCI Taiwan Index additions," Review of Financial Economics, Elsevier, vol. 21(2), pages 82-89.
    • Handle: RePEc:eee:revfin:v:21:y:2012:i:2:p:82-89
    DOI: 10.1016/j.rfe.2012.03.004
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    Cited by:

    1. Chen, Wei-Kuang & Lin, Ching-Ting, 2016. "Asymmetric responses to stock index reconstitutions: Evidence from the CSI 300 index additions and deletions," Pacific-Basin Finance Journal, Elsevier, vol. 40(PA), pages 36-48.

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    More about this item

    Keywords

    Index adjustment; MSCI Taiwan Index; Absolute forecast error;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G - Financial Economics

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