Price and Volume Effects Associated with Index Additions: Evidence from the Indian Stock Market
Abstract
This study investigates the price and volume effect of index additions to the benchmark Nifty index for the recent period 1999-2010 in the Indian stock market. This study evidences significant, positive permanent abnormal returns around index announcement and inclusion. The support for permanent abnormal volume around index additions is limited at best. The results in this study do not support either the downward sloping demand curve hypothesis or the price pressure hypothesis as the primary explanation for the index inclusion effect. This study contributes to the growing literature on index inclusion by providing evidence that stock addition to the benchmark Nifty index appears to convey information.
Keywords: Indian Equity market, Nifty index additions, Abnormal return and volume,
JEL classification: G14, G15.
Submission of an article implies that the work described has not been published previously (except in the form of an abstract or as part of a published lecture or academic thesis), that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, in English or in any other language, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.
Copyrights for articles published in MTI journals are retained by the authors, with first publication rights granted to the journal. The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author.
