The Effects of Index Changes on Stock Trading: Evidence from the EGX

Author's Department

Management Department

Second Author's Department

Management Department

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https://ideas.repec.org/a/bap/journl/180105.html

All Authors

Neveen Ahmed; Aliaa Bassiouny

Document Type

Research Article

Publication Title

Review of Economics and Finance

Publication Date

1-1-2018

Abstract

We examine the effects on firm price, volume and liquidity following changes in the composition of the Egyptian Stock Exchange main market index EGX30 over the period 2005-2015. The indexing methodology of the EGX30 is independent from performance criteria and allows us to test competing hypothesis that explain behaviors accompanying index changes. We find an asymmetric effect on deleted versus added firms supporting the downward slopping and investor awareness hypothesis. Firms added to the index experience significant price increases in the run-up window, trading volume effects in the run up and post change windows and enhanced liquidity which are not reversed in the post change period. Price and liquidity effects are not evident in deleted firms.

First Page

55

Last Page

66

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