Open AccessPRICE ANDVOLUME EFFECTS ASSOCIATED WITH CHANGES IN THE LQ 45 INDEX AND THE MSCI EQUITY INDEX LISTS
Author(s) -
A. Harijono
Publication year - 2003
Publication title -
gadjah mada international journal of business
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.192
H-Index - 9
eISSN - 2338-7238
pISSN - 1411-1128
DOI - 10.22146/gamaijb.5631
Subject(s) - equity (law) , market liquidity , index (typography) , portfolio , financial economics , economics , stock exchange , stock market index , index fund , capital market , monetary economics , business , institutional investor , stock market , finance , corporate governance , paleontology , open end fund , horse , world wide web , political science , computer science , law , biology
This paper examines price and trading volume behavior surrounding announcements of changes in the composition of the liquidity (LQ) 45 and the Morgan Stanley Capital International (MSCI) Equity Index at the Jakarta Stock Exchange. Unlike listing studies in the developed markets, the announcements of the LQ45 Index changes have no impact on share price and trading volume. This may be due to the small role of Indonesian domestic institutional investors and purely rule-based characteristics of the LQ45 Index. On the contrary, the markets do respond to the changes in Indonesian stocks composition of the MSCI Equity Index. It seems that global portfolio managers, who dominate trading at the Jakarta Stock Exchange, rebalanced their portfolio when the changes in the MSCI Equity Index occurred because their performances are generally benchmarks to the return on the Index.