Are the Market Effects Associated with Revisions to the TSE300 Index Robust?

Richard Chung and Lawrence Kryzanowski
Additional contact information
Richard Chung: Concordia University, Canada
Lawrence Kryzanowski: Concordia University, Canada

Multinational Finance Journal, 1998, vol. 2, issue 1, 1-36

Abstract: This article examines the stock market effects of changes in the composition of the TSE300 index over the period 1990-94. The test methodology adjusts for thin trading, pre- and post-revision abnormal performance and sample selection criterion effects. The models used to characterize returns include factors such as illiquidity and large trade activity. The positive and transitory median changes in traded volumes become insignificant when market-adjusted volumes are examined. No permanent effects on trade and analyst price behavior are identified. Traditional market-adjusted abnormal return inferences are not robust. The announcement window abnormal returns are smaller for annual versus non-annual index additions. This suggests that a longer advance notice period more than compensates for a larger number of simultaneous index revisions. The findings support the price pressure and liquidity hypotheses. Temporary changes in liquidity costs temporarily move stock prices from their equilibrium values, and announcement window abnormal returns are essentially reversed in subsequent periods.

Keywords: index revision; abnormal returns; liquidity; event study (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.mfsociety.org/modules/modDashboard/uplo ... o7f20fckd11kdlu3.pdf
http://www.mfsociety.org/modules/modDashboard/uplo ... ogleScholar/645.html

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:2:y:1998:i:1:p:1-36

Access Statistics for this article

Multinational Finance Journal is currently edited by Panayiotis C. Andreou

More articles in Multinational Finance Journal from Multinational Finance Journal Contact information at EDIRC.
Bibliographic data for series maintained by Theodossiou Panayiotis ().