The Effects of Changes in Index Composition: Evidence from NASDAQ OMXH
Jansson, Henrik (2011)
2011
Kuvaus
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Tiivistelmä
Earlier studies have shown that stocks added to an index generate significant abnormal returns on the announcement day. This thesis examines the abnormal returns and short-term performance of stocks that were added to Finnish HEX25/NASDAQ OMX25 index during 1999−2009. The objective was to find out whether the stock index inclusion triggers abnormal price behavior, and offer the most plausible explanation for such anomaly.
The empirical part was carried out by using the event-study approach. The announcement day and the effective change date abnormal returns were measured with the help of market model. The statistical inferences were verified by using as robust model as possible: Standarics Cumulative Abnormal Returns and the J2 test statistic.
The announcement day returns remained unchanged. The cumulative abnormal from the day following the announcement through price reversal is interpreted as a part of the downward-sloping long-term demand curves. None of the observed periods were statistically significant. The final results indicate that the Finnish stock market fulfills the conditions of semi-strong efficiency.
The empirical part was carried out by using the event-study approach. The announcement day and the effective change date abnormal returns were measured with the help of market model. The statistical inferences were verified by using as robust model as possible: Standarics Cumulative Abnormal Returns and the J2 test statistic.
The announcement day returns remained unchanged. The cumulative abnormal from the day following the announcement through price reversal is interpreted as a part of the downward-sloping long-term demand curves. None of the observed periods were statistically significant. The final results indicate that the Finnish stock market fulfills the conditions of semi-strong efficiency.