Leverage-based index revisions: The case of Dow Jones Islamic Market World Index

Haiwei Chen and Thanh Ngo

Global Finance Journal, 2017, vol. 32, issue C, 16-34

Abstract: US firms added to the Dow Jones Islamic Market World Index, a leverage-based index, witness permanent positive price and liquidity effects, whereas excluded firms sustain negative price and liquidity effects but no decrease in the investor awareness. Included/excluded firms experience a significant drop/no change in the cost of equity. Among the deleted firms, those with an increase in debt level bear a more severe decrease in liquidity and institutional ownership, and an increased cost of equity than those firms without an increase in debt use. Conveying private information on changes in a firm's corporate strategy and operating environment, revisions by a leverage-based index are different from those by size-based indexes.

Keywords: Islamic index; Index revisions; Leverage; Stock liquidity; Cost of equity (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:32:y:2017:i:c:p:16-34

DOI: 10.1016/j.gfj.2016.06.007

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