Does Nifty Index Inclusion (still) Convey Information? A Comprehensive Empirical Examination in the Indian Stock Market
Abstract
The objective of this study is to conduct a comprehensive empirical examination of the S&P CNX Nifty index additions, for the complete period (2000 - 2018), first sub period (2000-2009) and second sub period (2010-2018), using both the price and non-price effects and the explanations surrounding them in the Indian stock market. This event methodology is used with three abnormal return computational methods, around the announcement and inclusion dates of index addition, in order to improve the robustness and reliability of the results. The results show that the Nifty index additions are associated with significant permanent abnormal returns in the complete, first and second period. However, the index effect has diminished in the second period. The information related explanations dominate in the complete and first period. The second period finds support for the downward sloping demand curve hypothesis. I extend the existing literature to a hitherto unexplored new sample period (2010-2018) in order to examine the price and non-price effects around Nifty index additions.
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