The Study Of Index Effect Of Shanghai And Shenzhen Stock Market

Index effect is concerned by the amount of scholars as counter example of efficient market hypothesis. They do some research on whether there is the index effect in stock market, and try to explain the phenomenon. So far, there have been many scholars found index effect's existence in different stock markets, at the same time, they developed several kinds of hypothesis to explain the index effect. At the beginning they explained it in the traditional finance scope, and then spread to investors psychological point of view. These hypotheses include downward-sloping long-term demand curve hypothesis, price pressure hypothesis, information hypothesis, market segmentation hypothesis, etc.For the development of index in our country is late, so the domestic study of index effect is less than the oversea's. This paper is to study whether the index effects exists in the Shanghai and Shenzhen 300 index, and trying to explain the reasons of the index effect's existence. This paper adopts event study methodology, makes the period of 60 days before and after announcement day as the event window, and analyses the price effect and volume effect of this period. The results suggests that there is significant and sustained price effect of the additions, but the price effect of the deletions is not so significant as the additions, besides there is certain lags, and the long term cumulative average abnormal returns tend to be positive. Based on the above characteristics, the author attempt to use market segmentation theory to explain. The author collected shareholders quantity, institutional shareholders quantity, the company scale, and cumulated the shadow cost before and after adjustment, finding that the shadow cost can explain the existence of index effect. In addition, the author use regression analysis to get the some other factors that influence accumulated abnormal return.