Demand Curves for Stocks Do Slope Down: New Evidence from an Index Weights Adjustment

Posted: 26 May 2013 Last revised: 30 May 2013

See all articles by Aditya Kaul

Aditya Kaul

University of Alberta - Department of Finance and Statistical Analysis

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: April 23, 1999

Abstract

Weights in the Toronto Stock Exchange 300 index are determined by the market values of the included stocks’ public floats. In November 1996, the exchange implemented a previously announced revision of its definition of the public float. This revision, which increased the floats and the index weights of 31 stocks, conveyed no information and had no effect on the legal duties of shareholders. Affected stocks experienced statistically significant excess returns of 2.3 percent during the event week, and no price reversal occurred as trading volume returned to normal levels.These findings support downward sloping demand curves for stocks.

Suggested Citation

Kaul, Aditya and Mehrotra, Vikas and Morck, Randall K., Demand Curves for Stocks Do Slope Down: New Evidence from an Index Weights Adjustment (April 23, 1999). Journal of Finance, Vol. 55, No. 2, 2000; University of Alberta School of Business Research Paper No. 2013-214. Available at SSRN: https://ssrn.com/abstract=2269158

Aditya Kaul (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
403-492-5027 (Phone)
403-492-3325 (Fax)

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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