The long-term performance of index additions and deletions: Evidence from the Hang Seng Index
Hung Wan Kot,
Harry K.M. Leung and
Gordon Y.N. Tang
International Review of Financial Analysis, 2015, vol. 42, issue C, 407-420
We investigate the long-term performance of firms added to or deleted from the Hang Seng Index from 1986 to 2008. The stocks newly deleted from the Hang Seng Index have abnormal returns over a 5-year holding period and the newly added stocks do not. The deleted stocks outperform the added stocks, with the difference resulting from poorly performing state-owned added stocks and better performing family-owned deleted stocks. The operating performance of the deleted stocks improves in the post-event period and that of the added stocks does not. The liquidity and beta of the added stocks decrease and the analyst coverage increases. Meanwhile, the liquidity and analyst coverage of the deleted stocks decrease. Regression analyses show that changes in operating performance are the most important factors explaining the long-term stock performance of added and deleted stocks.
Keywords: Index revisions; Hang Seng Index; Long-term performance; Operating performance; Analyst coverage (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
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