Asymmetric Stock Price and Investor Awareness Reactions to Changes in the Nasdaq 100 Index

Journal of Asset Management 20 (2), March 2019, 134-145

32 Pages Posted: 14 Apr 2020

See all articles by Ernest N. Biktimirov, Ph.D., CFA

Ernest N. Biktimirov, Ph.D., CFA

Brock University, Goodman School of Business

Yuanbin Xu

Brock University - Faculty of Business

Date Written: 2019

Abstract

We examine market responses to changes in the Nasdaq 100 index membership and find asymmetric stock price and investor awareness reactions. Stocks added to the Nasdaq 100 index for the first time experience permanent price gains and significant increases in investor awareness, whereas repeated additions and new deletions exhibit temporary stock price changes and no significant changes in investor awareness. Stock liquidity improves for new additions and repeated additions but worsens for new deletions. Importantly, investor awareness proxies are significantly related to cumulative abnormal returns around the Nasdaq 100 reconstitution even in the presence of liquidity and other controlling factors. Taken together, the observed results are consistent with the investor awareness hypothesis.

Keywords: abnormal return, event study, index changes, investor awareness, liquidity, Nasdaq 100 index

JEL Classification: G12, G14

Suggested Citation

Biktimirov, Ernest N. and Xu, Yuanbin, Asymmetric Stock Price and Investor Awareness Reactions to Changes in the Nasdaq 100 Index (2019). Journal of Asset Management 20 (2), March 2019, 134-145, Available at SSRN: https://ssrn.com/abstract=3557110

Ernest N. Biktimirov (Contact Author)

Brock University, Goodman School of Business ( email )

1812 Sir Isaac Brock Way
St. Catharines, Ontario L2S 3A1
Canada
905-688-5550 Ext. 3843 (Phone)

Yuanbin Xu

Brock University - Faculty of Business ( email )

St. Catharines, Ontario L2S 3A1
Canada

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