Do Recent Changes in the Dow Jones Industrial Average Support the Price-Pressure Hypothesis
Freeman, Patricia, Geungu Yu, and Phillip Fuller. “Do Recent Changes in the Dow Jones Industrial Average Support the Price-Pressure Hypothesis.” Southwestern Economic Review (Spring 2007): 179-186
8 Pages Posted: 1 Jun 2017
Date Written: May 29, 2017
The price-pressure hypothesis (PPH) assumes that a temporary increase (decrease) in returns and volume results as firms are added to (deleted from) an index around the announcement date. This event study analyzed recent unexamined changes in the Dow Jones Industrial Average (DJIA) since 1996. Examination of returns of firms added to and firms deleted from DJIA did not support the PPH. Only deleted stocks’ volume exhibited a slight increase following the announcement dates. Otherwise, the volume analyses for stocks either added to or deleted from the DJIA tended not to support the PPH.
Keywords: Price-pressure hypothesis, DJIA additions
JEL Classification: G11, G12
Suggested Citation: Suggested Citation