Studies Like Effect Of The CSI 300 Index Tune

The index effect is defined as the abnormal market reflection of price and volume of the stocks being added into and deleted from an index as the index adjusts its sample stocks timely. Generally, index composition changes have a substantial impact on stock price and trading volume, addition price will rise and trading volume will increase while deletion price get down and trading volume decrease. In present, the research of index effect has become an important part of the research of investors’behaviors.The index effect has been shown in numerous other studies to result in unusual stock price behavior during the event period that can not be consistent with the Efficient Markets Hypothesis. Consequently, a number of other hypotheses have been considered to justify this performance. The hypotheses that have been proposed in the previous literature are the Price Pressure Hypothesis, the Imperfect Substitutes/Downward-Sloping Demand Curve for Stocks Hypothesis, the Liquidity Cost Hypothesis, the Information Content/Index Member Certification Hypothesis, and the Market Segmentation/Investor Recognition Hypothesis. Their main differences concern whether the stock price or volume change is temporary or permanent after the event, what kind of information is revealed with an addition or deletion, and what are the main issues for stock and investor behavior. These Hypotheses have been quite controversial, but all found some support in previous studies for explaining abnormal returns during the event. Differences in findings across studies can be attributed to differing sample periods or to differing definitions of what constitutes the short or long run. We aim to contribute to this debate by employing a different method for calculating abnormal returns.This paper researches the index effect of the HS300index using event study methodology, where a three-factor pricing model that allows firm size and value characteristics as well as market risk is applied to calculate shares’abnormal return. Previous studies have used a variety of different methods for calculating abnormal returns during the event window. However, the most common method that past studies have used is the single-factor model, incorporating market risk. Estimates of the alpha and beta coefficients would then be obtained using a historic estimation period. Instead of the Capital Asset Pricing Model or a single-factor model, we employ the Fama-French three-factor model to control for size and value effects. The results presented below examine the firm’s performance from5trading days before the announcement date (AD-5). Our short-run event window is defined to end15trading days after the effective date (ED+15), the long-run event window is defined to end180 trading days after the effective date (ED+180), and we use115trading days befor the event to obtain a first set of the Fama-French three-factor model coefficients.This study has examined the performance of the firm stocks that were included and excluded in the HS300index during the period2009-2011using the Fama-French three-factor model for the abnormal return calculation. This study found no support for the Price Pressure Hypothesis because the price increases did not fully reverse in the long run, and the Market Segmentation Hypothesis seemed best able to explain the index effect. We also observed a temporary increase in trading volume, but a significant increase in earnings per share and little increase in stock return volatility.