Information Content of Changes in Index Composition.

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This study examines the effect of changes in the Korea Stock Exchange Price Index to determine the main cause of abnormal return behavior. It tests five prevailing hypotheses individually and simultaneously using both added and deleted stocks during the event window. We find evidence of permanent price effects and of temporary price pressure around the effective date. The results show that the return behavior of added and deleted stocks can be explained by the information content hypothesis. The indexing methodology conveys the valuable information that the added stocks showed good performance and better earnings relative to both the market and the same industry average while the deleted stocks showed the opposite. In conclusion, member changes in the Korea Stock Exchange Price Index are not information-free events.
Publisher
WILEY-BLACKWELL
Issue Date
2011-04
Language
English
Article Type
Article
Keywords

DEMAND CURVES; STANDARD-AND-POOR-500 LIST; S-AND-P-500 INDEX; STOCK RETURNS; SHARE PRICES; ADDITIONS; SLOPE

Citation

ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, v.40, no.2, pp.317 - 346

ISSN
2041-9945
DOI
10.1111/j.2041-6156.2011.01040.x
URI
http://hdl.handle.net/10203/95750
Appears in Collection
MT-Journal Papers(저널논문)
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