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The Effects of Index Changes on Stock Trading: Evidence from the EGX

Neveen Ahmed () and Aliaa Bassiouny ()
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Neveen Ahmed: School of Business, The American University in Cairo, AUC Avenue, New Cairo 11835, Cairo, EGYPT
Aliaa Bassiouny: School of Business, The American University in Cairo, AUC Avenue, New Cairo 11835, Cairo, EGYPT

Review of Economics & Finance, 2018, vol. 11, 55-66

Abstract: We examine the effects on firm price, volume and liquidity following changes in the composition of the Egyptian Stock Exchange main market index EGX30 over the period 2005- 2015. The indexing methodology of the EGX30 is independent from performance criteria and allows us to test competing hypothesis that explain behaviors accompanying index changes. We find an asymmetric effect on deleted versus added firms supporting the downward slopping and investor awareness hypothesis. Firms added to the index experience significant price increases in the run-up window, trading volume effects in the run up and post change windows and enhanced liquidity which are not reversed in the post change period. Price and liquidity effects are not evident in deleted firms.

Keywords: Abnormal return; Abnormal volume; Liquidity; Index change (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G15 (search for similar items in EconPapers)
Date: 2018
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