Empirical Study On Index Effect Of CSI 300 Index

Index effect shows the response to the change of a portfolio of the relevant stocks in terms of price and trading volume. In general, according to the research results by foreign scholars, stock price will rise and trading volume will increase in response to the add-in of stock to the portfolio while the price will get down and trading volume will increase with the remove of stocks from a portfolio. Index effect has been gaining more and more attention for its abnormality in finance.Commonly used method for the study of the index effect is the event window built during the time between announcement day and implement day, both of which contain adjustment programs of the sample. Announcement day is the time authorities announced adjustment programs on its official Web site, and the implement day is the time the programs would be implemented. Take the time periods before the event window as the estimate variable to get the estimation of the yield returns and trading volumes of relevant stocks. This paper takes The Capital Asset Pricing Model (CAPM) to get the price of the stocks.From the study results on the index effect by domestic scholars, we can find most of the base time taken at the adjustment day, and the time period for the event window is around the base time mainly lasting five or twenty days. It is easy to deal; however, the price and trading volume are left uncovered. This paper takes the announcement day and implement day as the base time, and builds the short-term event window ranging from implement day to coming five days. Taking the anticipation into consideration, the paper takes the time period ranging from the day prior to the announcement day for five days to the day after the implement day for five days to build the short-term event window, so as to study the abnormal response at the announcement day, but also the response at the implement day. As for the time period between the announcement day and implement day, the paper takes fifteen days as the option regarding the adjustment program of the CSI 300 index and specific samples, which is one of the contributions of the paper. In addition, the paper does a lot of job dealing with the data processing, centers on the index effect excluding other factors causing different results. This is another contribution of the paper.Abroad studies on index effect have been relatively mature, such as the S & P500 index effect, and the causes for the exponential effect have been put forward into 5 kinds of hypotheses, namely, downward-sloping demand curve hypothesis, price pressure hypothesis, the information content hypothesis, liquidity and market segmentation hypothesis. The main difference of the five hypotheses is whether the index adjustment is zero information; the abnormal price movements and trading volume fluctuation are valid in short term or in long term. The former hypotheses have gotten empirical results in former studies. In the studies about the index effect on the indexes abroad, especially S & P500, the phenomena is obvious, and Downward-sloping demand curve hypothesis has become a widely accepted hypothesis. As the stock market started late in China compared to developed countries in the market and improve the extent there is a gap, the exponential effect of the current field of research still in its infancy. Effect on the index of research is generally done only since 2000 began to appear, the previous studies conducted show that the index of the stock market effect is not like the S & P500 index of the index it was in effect. At the same time index for the effect of the hypothesis that there are also applicable to relatively large differences, which is China's stock market characteristics, especially the size of China's stock market ETF, especially on the low side. Effect in the index, the index funds, and ETF funds in particular, played a very important role. ETF funds generally used as a passive management strategy, which is followed by a passive index, believe that the market is effective, any attempt to analyze the stock market beat the market approach is futile, so do not take the initiative of its portfolio adjustments. When a stock was transferred to the same index, ETF funds track the index in order to reduce the error, often will be implemented in the indices of the stock transferred to the day of the investment portfolio, and for the transfer out of the stock to take the opposite action. Since China's stock market index for the Shanghai and Shenzhen 300 index fund investment targets in terms of both number and scale can not compare the U.S. stock market, which is not as good as our stock market index effect on the foreign developed markets index significant effect reasons. This article studies on the events of previous adjustments in the Shanghai and Shenzhen 300 Index from July 2007 to January 2010, and we get that 300 index effects does exist, but not as mature foreign markets as the index effects significant. Our results support the market segmentation hypothesis, that investors in the market is familiar with it know that some of the stock, only the analysis of these stocks and options investors.