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Trading the changes of stock market index composition: evidence from European markets
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Orientador(es)
Resumo(s)
This paper studies the changes in European stock market indexes composition from 1995
to 2015. It was found that there are mixed price effects producing abnormal returns around
the effective replacement of added and deleted stocks. The price pressure hypothesis
seems to hold for added stocks in some indexes but not for deleted stocks as there is not
a clear inversion of behaviour after the replacement. Finally, the building and back testing
of a trading strategy aiming to capture some of those abnormal returns shows it yields a
Sharpe Ratio of 1.4 and generates an annualised alpha of 11%.
Descrição
Palavras-chave
Stock index revision Additions Deletions Event study Abnormal returns European markets Trading strategy