OCK INCLUSION IN SELECTED INDICES – A STUDY OF IMPACT ON STOCK RETURNS AND LIQUIDITY MEASURES
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Date
2011
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Punjab Agricultural University
Abstract
Stock inclusions and exclusions continuously happen in stock indices and many of the studies
have shown that these events have effect on stock market performance in terms of return and
volume. Present study “Stock Inclusion in Selected Indices- A Study of Impact on Stock Returns
and Liquidity Measures” was undertaken to empirically access the impact of stock inclusions on
stock returns and liquidity. Ten inclusions were randomly selected from a list of twenty stock
inclusions and such selection was done for each of indices namely sensex representing large cap
stocks, BSE mid cap index representing mid cap stocks and BSE small cap index representing
small cap stocks. No abnormal and cumulative abnormal returns were found during event window
ranging from e-1 through e+1 where „e‟ stands for event day. It was only in the mid cap stocks
that significant abnormal and cumulative abnormal returns were found at e-4 day during pre event
window upto e-10 days. During the post event window upto e+10 days the significant abnormal
returns were found at e+4 day in case of mid cap and e+9 in case of small cap. No significant
cumulative abnormal returns were found in post event window. No impact of stock inclusion was
seen on liquidity measures of selected events
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Keywords
abnormal returns, stock