Empirical Study On CSI300 Index Effect And Institutional Behavior

Index effect is a phenomenon when stocks added into index, stock price will increase during announcement day time window and the change time day window. While when stocks deleted from index, stock price will decrease. Both additions and deletions volume will increase. The research is relatively mature,form a systematic theory and research production on foreign developed capital market, especially the research on S&P 500 index. But the research is limited in China. Now with the development of Chinese index market, mutual fund, private offering fund, social security fund expand. With the institutional investor play a more important role, especially the appearing of CSI300 index futures and more index production will appear, index research become more serious than ever. CSI300 index is an index across the market of Shanghai and Shenzhen, until now the research of CSI300 index is little. So, this paper will do research on CSI300 index, improve the index theory system and guide concept of index investment in our country. And from July 1, 2005 to June 16, 2014 a total of 868 constituent stocks will be the sample. Most stocks adjusted periodically, including interim adjustment. 19 times regular adjustment, 17 times interim adjustment, 434 stocks transferred to index, 434 stocks out of. We divide the research window to announcement day time window and the change day time window. The research find additions and deletions have index effect during the announcement day time window. The additions stock price have no change during the change day time window, the deletions stock price will decrease before the change day and will reverse after the change day. This paper also carries on the analysis to the behavior of institutional investors and company profitability. The results found a significant holding increase of institutional investor to additions and decrease to deletions, but the company profitability don’t have any change during the research window. At the end of the article we present no risk arbitrage strategy based on the CSI300 index. Provide support to the empirical and theoretical for institutional and no risk arbitrage investors of the market, promote capital market price discovery and prosperity.