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Changes in the Nikkei 500: New Evidence for Downward Sloping Demand Curves for Stocks
Author(s) -
Liu Shinhua
Publication year - 2000
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/1468-2443.00018
Subject(s) - economics , volume (thermodynamics) , econometrics , monetary economics , demand curve , financial economics , microeconomics , quantum mechanics , physics
This study investigates the price and trading volume effects of changes in the Nikkei 500. On average, prices increase (decrease) significantly for stocks added (deleted) with no significant post‐event reversals. Trading volume, on average, increases significantly for both stocks added and deleted in the short run. In the long run, however, trading volume falls (rises) significantly for stocks added (deleted), contrary to previous findings. These results support the hypothesis of downward sloping demand curves for stocks and refute three competing hypotheses. Finally, the Nikkei 500 changes cause considerably less pronounced price changes than do the S&\amp;P 500 changes.