DJIA Index Membership and the Flow of Information Between Stock Returns

33 Pages Posted: 4 Feb 2008 Last revised: 3 Apr 2009

See all articles by Bing Anderson

Bing Anderson

California State Polytechnic University, San Luis Obispo - Finance Area

Maria Kasch

University of Mannheim - Department of Finance

Date Written: December 1, 2006

Abstract

We contribute to the limited literature on interactions between individual stocks at the market microstructure level by utilizing an asynchronous multi-asset data integration methodology. For the periods before and after the Dow Jones Industrial Average (DJIA) revisions in 1999 and 2004, we investigate effects of membership in the DJIA on the changes in the relative speed of price adjustment to common information. Although, for the analyzed stocks, index membership in many cases is associated with a higher relative speed of price adjustment, it is neither a necessary nor a sufficient condition for having a lead in price movement.

Keywords: Tick-by-tick multi-asset data integration, DJIA revisions, Leag-lag relationship

JEL Classification: G14, G19

Suggested Citation

Anderson, Bing and Kasch, Maria, DJIA Index Membership and the Flow of Information Between Stock Returns (December 1, 2006). Available at SSRN: https://ssrn.com/abstract=1089182 or http://dx.doi.org/10.2139/ssrn.1089182

Bing Anderson

California State Polytechnic University, San Luis Obispo - Finance Area ( email )

College of Business
San Luis Obispo, CA 93407
United States

Maria Kasch (Contact Author)

University of Mannheim - Department of Finance ( email )

L5, 2, room 105
Mannheim, 68161
Germany
+49 621 181 1514 (Phone)
+49 621 181 1519 (Fax)

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