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
Date Written: March 9, 2013
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: Suggested Citation