PRICE AND VOLUME EFFECTS ASSOCIATED WITH A CHANGE IN THE NIKKEI 225 INDEX LIST: NEW EVIDENCE FROM THE BIG CHANGE ON APRIL 2000

Abstract

This paper examines stock price and volume effects associated with a change in the composition of the Nikkei 225 index in Japan in April 2000. Our results include the following: first, we show that newly added firms experience significant positive excess returns of 19% in the five-day period after the announcement of the change; in contrast, deleted and remaining firms’ returns are negatively affected, −36 and −14%, respectively; second, volume tests show significant increase in trading activity after the announcement for both added and deleted firms; third, cross-sectional analysis provides evidence that higher arbitrage risk and demand shocks increase the absolute value of excess returns.

Citation

Hanaeda, H. and Serita, T. (2003), "PRICE AND VOLUME EFFECTS ASSOCIATED WITH A CHANGE IN THE NIKKEI 225 INDEX LIST: NEW EVIDENCE FROM THE BIG CHANGE ON APRIL 2000", Choi, J.J. and Hiraki, T. (Ed.) The Japanese Finance: Corporate Finance and Capital Markets in ... (International Finance Review, Vol. 4), Emerald Group Publishing Limited, Leeds, pp. 199-225. https://doi.org/10.1016/S1569-3767(03)04010-X