Abstract

http://ssrn.com/abstract=1780805
 
 

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Additions to Market Indices and the Comovement of Stock Returns Around the World


Stijn Claessens


International Monetary Fund (IMF); University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR); Tinbergen Institute; European Corporate Governance Institute (ECGI)

Yishay Yafeh


Hebrew University of Jerusalem - Jerusalem School of Business Administration; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

March 2011

IMF Working Paper No. 11/47

Abstract:     
Using newly-constructed data covering the last decade, we document that, in most of forty markets, when added to the main index, firms’ returns experience an increase in comovement with the rest of the index, reflected in higher beta and greater explanatory power of the market return. Stock turnover and analyst coverage also typically increase upon inclusion. Using various tests, we find the demand-based view of comovement (the category/habitat theories of Barberis, Shleifer and Wurgler, 2005) to provide a good explanation for many of our findings. Some results, though, suggest that information-related factors are also important in explaining the increased comovement.

Number of Pages in PDF File: 35

Keywords: Cross country analysis, Demand, International capital markets, Investment, Stock markets, Stock prices

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Date posted: March 9, 2011  

Suggested Citation

Claessens, Stijn and Yafeh, Yishay, Additions to Market Indices and the Comovement of Stock Returns Around the World (March 2011). IMF Working Papers, Vol. , pp. 1-34, 2011. Available at SSRN: http://ssrn.com/abstract=1780805

Contact Information

Stijn Claessens (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
202-623-7641 (Phone)
202-5897641 (Fax)
University of Amsterdam - Finance Group ( email )
Roetersstraat 18
Amsterdam, 1018 WB
Netherlands
+31 20 525 6020 (Phone)
+31 20 525 5285 (Fax)
HOME PAGE: http://www.fee.uva.nl/fm/index.htm
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Tinbergen Institute ( email )
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Yishay Yafeh
Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )
Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3081 (Phone)
+972 2 588 1341 (Fax)
HOME PAGE: http://bschool.huji.ac.il/facultye/yafeh/
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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