Empirical Analysis Of The Index Effect On Chinese Stock Market

With global capital markets development and improvement, the index of investment and its derivatives became more and more investors concerned about the object, Such as the very famous worldwide, with a high degree of market acceptance of the S & P 500 Index, the Dow Jones Industrial Average, the London Financial Times Index and the Nikkei 225 index. As we all know, capital markets, especially the stock market is constantly changing, countries always have to ensure that its index benchmark and investment in the role of representative samples, Most of the component index will be adjusted periodically or temporary adjustments, when the index adjusted, number of shares transferred in or out, the market in index-tracking investors target a range of products such as exchange-traded index funds and index Funds need to amend the investment portfolio in order to avoid non-systematic investment risk, reduce tracking error. Investors, especially institutional investors to adjust behavior usually adjust within a certain period of time the event occurred concentrate on, simultaneously in the same direction:Transferred the stock to buy, sell shares transferred out of their group behavior will affect the adjustment of the incident and volume of stock prices, and trigger in the market known as the "Index Effect" financial vision.So far worldwide, many countries have been found "index effect" in the stock market, in order to verify the existence of financial vision in the Chinese market, and its investment in the Chinese market in particular any special performance, In this paper, the most important A-share market, the most representative sample of the Shanghai and Shenzhen 300 Index as a research object, select from the June 22,2005 official release date of the index until January 3,2011 adjusted for the sample, which adjust the frequency of a total of 27 times, involving a total adjustment of 574 shares.This paper uses event study methodology to abnormal returns, cumulative average abnormal returns, abnormal trading volume ratio as the measure, the index effect on the expansion of evidence, evidence related to the main contents of the following, China’s CSI 300 index futures contract was introduced, whether the index effect performance will more significant as the foreign experience.Through empirical research, the main conclusions of this paper are the following:1. HS 300 Index effect is exist in the presence of A share market, and the effect of the performance significantly. Specifically, the price effect of transferred stocks appeared earlier point in time, but in the long-term observation window, the performance was not significant. The cumulative average abnormal returns began to increase 18 days before the announcement, and it does not appear to reverse until 30 days after the date of effective day. Transferred out of class later point in time the stock price effect occurs, but the performance of intense,6 days after the date of the announcement cumulative average abnormal returns have fallen sharply, subsequently show of theⅤ-type inversion on the effective day.2. transferred stocks cumulative abnormal returns on average increasing trend of flat line, while the line is transferred out of class realized dramatic numerical fluctuations; Occurrence of two types of stock price effects at different times, the cumulative average abnormal returns are significantly different, the performance of this asymmetry, indicating that China’s A share market data support the hypothesis of market segmentation.3. Incoming and outgoing stock volume effects similar. Two classes of shares after the announcement date were obvious signs of volume expansion and rapid contraction after the effective date, down to the expected value below 1. Compared to the price effect, two types of stock trading volume in the long term performance are not significant. At the same time, the abnormal turnover rate link with the abnormal returns, we find that the effective date in the notice to have the same effect between the two relations with the drop, which is consistent with the price pressure hypothesis, but different from other literature is that price pressure hypothesis at this stage only memory.The main innovations are as follows. First, the study is on the CSI 300 Index, it has a very good representative sample. It is China’s the first stock Index which across the market for the Shanghai and Shenzhen, with a strong representation and market acceptance of the sample, which for the empirical results provide a basis for comprehensive and accurate conditions.Second, the index effect of the domestic literature who have estimated rate of return of stocks expected are usually use the "average rate of return method", But Chandra, Moriarty and Willinger (1990) conducted a more detailed empirical comparison of specialized, they found that method of using the market model, the result will be more scientific and accurate. In this paper, dealing with the original samples, the authors used a more stringent approach to be adjusted to avoid other events such as stock mergers and acquisitions, asset restructuring and other information on the calculation of abnormal returns credibility.Third, for all of the effect of index with domestic literature, this paper first observation after the HS 300 stock index futures set up, whether the stock price effect and volume effect constitutes a significant impact. We find that after the introduction of stock index futures, index of the occurrence of the timing, duration, degree of significant changes have taken place in the larger.