The Study Of Price Effect Of HS 300 Index With Fama-French Three Factor Model

When an index announces adjusting its index stock,the stock’s price and trading volume will have an abnormal change on the announcement date and effective date.The price of the additional stocks will rise,and the price of deleted stocks goes fall.The trading volume will be enlarged in both of situation.In countries with developed capital markets such as Europe and the United States,the index effect has been extensively studied and many theoretical results have been produced.Due to the late start of capital market establishment in China,the research on the index effect is still in the stage of existence verification,and the research is relatively insufficient.In this paper,the empirical analysis and theoretical analysis are based on the HS 300 index adjustment event from December 2006 to June 2018.Fama.French Three Factor Model and the Event Study method have been used during the empirical.The founds as follow:(1)There is an insignificant price effect on additional stock,while a siglificant trading volume effect;there are both significant price effect and trading volume effect on deleted stock.(2)The index effect of the HS 300 Index is asymmetric,in which the index effect of deleted stocks is stronger than that of additional stocks.Besides,the abnormal trading volume of additional stocks has an incomplete correction in the short-term and still has a certain impact in the long run;however,the abnormal trading volume of deleted stocks has a complete correction in the long-term.(3)The deleted stock has a long-term price effect and a short-term trading volume effect;the additional stocks have a long-term trading volume effect.(4)In this paper,tihe index effect of HS300 index is more in line with the interpretation of the information content hypothesis and the liquidity hypothesis.