The effects of changes in index composition on stock prices and volume: Evidence from the Istanbul stock exchange

Bildik R., Gülay G.

International Review of Financial Analysis, cilt.17, sa.1, ss.178-197, 2008 (Scopus) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 17 Sayı: 1
  • Basım Tarihi: 2008
  • Doi Numarası: 10.1016/j.irfa.2006.10.002
  • Dergi Adı: International Review of Financial Analysis
  • Derginin Tarandığı İndeksler: Scopus
  • Sayfa Sayıları: ss.178-197
  • Anahtar Kelimeler: Index composition, Market efficiency, Price and Volume effects, Stock index revisions
  • İstanbul Ticaret Üniversitesi Adresli: Hayır

Özet

Previous evidence has shown that stocks included in (excluded from) an index exhibit significant positive (negative) abnormal returns on the announcement day, and that trading volume is affected by the event. This study examines the price and volume effects on stocks associated with the changes in the value-weighted index composition of two indices, of the ISE, where the index funds and index derivatives do not exist. Consistent with previous evidence, stocks included in (excluded from) the index tend to generate positive (negative) abnormal returns in ISE. Volume and volume volatility are also significantly affected. Our results seem to support the hypotheses of price-pressure, imperfect substitute and attention due to the lack of index-funds and derivatives market in Turkey. © 2006 Elsevier Inc. All rights reserved.