Premium
Stock Price and Volume Effects Associated with Compositional Changes in European Stock Indices
Author(s) -
Vespro Cristina
Publication year - 2006
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1354-7798.2006.00312.x
Subject(s) - economics , market liquidity , index (typography) , econometrics , financial economics , stock market index , stock (firearms) , capitalization weighted index , monetary economics , stock market , biology , geography , paleontology , archaeology , horse , world wide web , computer science
This paper provides further evidence of price and volume effects associated with index compositional changes by analysing the inclusions (exclusions) from the French CAC40 and SBF120 indices, as well as the FTSE100. I find evidence supporting the price pressure hypothesis associated with index fund rebalancing, but weak or no evidence for the imperfect substitution, liquidity and information hypotheses. The results improve on recent evidence from the S&P500 index. The evidence for the FTSE100 additions shows, in particular, that markets learn about an imminent inclusion and incorporate this information into prices, even before the announcement date .