Stock Price and Volume Effects Associated with Changes in the Composition of the FTSE Bursa Malaysian KLCI

27 Pages Posted: 11 Feb 2014 Last revised: 15 Feb 2014

See all articles by Alcino Azevedo

Alcino Azevedo

Aston Business School

Mohamad Nazri Abd Karim

University of Hull

Andros Gregoriou

University of Brighton

Mark Rhodes

Hull University Business School (HUBS)

Date Written: March 9, 2013

Abstract

We examine the stock price and volume effects of changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005 to 2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because substantial stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Significant changes in liquidity causes trading volume and stock prices to reverse back to their original level before the index revisions took place.

Keywords: Addition, Deletion, Index Revision, Price Effect, Liquidity Effect, Volume Effect

JEL Classification: G12, G14

Suggested Citation

Azevedo, Alcino and Abd Karim, Mohamad Nazri and Gregoriou, Andros and Rhodes, Mark, Stock Price and Volume Effects Associated with Changes in the Composition of the FTSE Bursa Malaysian KLCI (March 9, 2013). Available at SSRN: https://ssrn.com/abstract=2393641 or http://dx.doi.org/10.2139/ssrn.2393641

Alcino Azevedo (Contact Author)

Aston Business School ( email )

Econ., Finance & Enterpreneurship
Aston Business School
Birmingham, B4 7ET
United Kingdom

Mohamad Nazri Abd Karim

University of Hull ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Andros Gregoriou

University of Brighton ( email )

Brighton
Brighton, BN2 4AT
United Kingdom

Mark Rhodes

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom

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