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Price and Volume Effects Associated with Index Additions: Evidence from the Indian Stock Market

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  • Srikanth Parthasarathy

Abstract

This study investigates the price and volume effect of index additions to the benchmark Nifty index for the recent period 1999-2010 in the Indian stock market. This study evidences significant, positive permanent abnormal returns around index announcement and inclusion. The support for permanent abnormal volume around index additions is limited at best. The results in this study do not support either the downward sloping demand curve hypothesis or the price pressure hypothesis as the primary explanation for the index inclusion effect. This study contributes to the growing literature on index inclusion by providing evidence that stock addition to the benchmark Nifty index appears to convey information.Keywords- Indian Equity market, Nifty index additions, Abnormal return and volume,JEL classification- G14, G15.

Suggested Citation

  • Srikanth Parthasarathy, 2010. "Price and Volume Effects Associated with Index Additions: Evidence from the Indian Stock Market," Asian Journal of Finance & Accounting, Macrothink Institute, vol. 2(2), pages 5580-5580, December.
    • Handle: RePEc:mth:ajfa88:v:2:y:2010:i:2:p:55-80
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    Cited by:

    1. Abdul Rahman & Prabina Rajib, 2018. "Index Revisions, Stock Liquidity and the Cost of Equity Capital," Global Business Review, International Management Institute, vol. 19(4), pages 1072-1089, August.

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    JEL classification:

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

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