Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI

Alcino Azevedo, Mohamad Karim, Andros Gregoriou and Mark Rhodes

Journal of International Financial Markets, Institutions and Money, 2014, vol. 28, issue C, 20-35

Abstract: We examine the stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005–2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because significant stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Our empirical findings can be explained by the market microstructure literature. Significant changes in liquidity cause trading volume and stock prices to reverse back to their original level before the index revisions took place.

Keywords: Index revision; Price effect; Liquidity effect; Volume effect (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:28:y:2014:i:c:p:20-35

DOI: 10.1016/j.intfin.2013.10.001

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