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Converting TSX 300 Index to S&P/TSX Composite Index: Effects on the Index’s Capitalization and Performance

Author

Listed:
  • Shamsul Alam
  • Ebenezer Asem
  • Shirin Shams

Abstract

In May 2002, the TSX (Toronto Stock Exchange) 300 Index was converted to S&P/TSX Composite Index, increasing the flexibility of stock addition to, and deletion from, the Index. We study whether the increased flexibility enhances the Index’s ability to mimic the Canadian equity market performance and to represent the equity market. Our results show that the S&P/TSX Composite Index captures a higher proportion of the equity market and has a lower tracking error than the TSX 300 Index. This suggests that flexibility in updating the constituents of an index is an important determinant of the index’s ability to represent the underlying market.

Suggested Citation

  • Shamsul Alam & Ebenezer Asem & Shirin Shams, 2016. "Converting TSX 300 Index to S&P/TSX Composite Index: Effects on the Index’s Capitalization and Performance," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(6), pages 250-250, June.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:6:p:250
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    References listed on IDEAS

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    3. Shleifer, Andrei, 1986. "Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-590, July.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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