The Index Effect Minute by Minute: Intraday Returns at NASDAQ-100 and MSCI U.S. Rebalancings

49 Pages Posted: 6 Oct 2019

See all articles by Friedrich-Carl Franz

Friedrich-Carl Franz

Goethe University Frankfurt - Department of Finance

Date Written: September 24, 2019

Abstract

I use intraday data from 2013 to 2017 and a dataset of NASDAQ-100, MSCI USA and MSCI USA Small Cap Index constituent changes to investigate abnormal returns and trading volume around index rebalancings. The results show no pre-announcement speculation but a significantly positive (negative) post-announcement jump followed by an intraday drift for promotions (demotions). For small-cap changes, the post-announcement jump is smaller but abnormal returns with the same sign are also found on the rebalancing date and especially during the last 30 minutes of trading. Large-cap index changes have higher abnormal trading volume but much smaller abnormal returns on the rebalancing date. Consistent with the price pressure hypothesis, I find a reversal during the early trading hours on the day following the rebalancing date.

Keywords: index rebalancing, passive investment, index effect, index investing

JEL Classification: G12, G14

Suggested Citation

Franz, Friedrich-Carl, The Index Effect Minute by Minute: Intraday Returns at NASDAQ-100 and MSCI U.S. Rebalancings (September 24, 2019). Available at SSRN: https://ssrn.com/abstract=3459744 or http://dx.doi.org/10.2139/ssrn.3459744

Friedrich-Carl Franz (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
63
Abstract Views
487
rank
390,393
PlumX Metrics