Stock Return Response to Changes in MSCI Standard and Small Cap Index Composition for Turkey

Authors : Emin AVCI, Murat ÇİNKO, Mehtap ÖNER, Aslı AYBARS

Pages : 41-59

Doi:10.19168/jyasar.1151230

View : 32 | Download : 6

Publication Date : 2023-02-03

Article Type : Research Paper

Abstract :The effect of index reconstitution on stock return and volume have been one of the controversial subjects in finance. Although, there are several researches, which are analyzing the domestic stock market index effect on stocks, a few studies focused on the effects of an international index. By the use of event study methodology, this paper analyzes the price effect of changes in constituents of two MSCI indexes insert ignore into journalissuearticles values(Standard Index and Small Cap Index); for Turkish companies as of announcement and effective dates. Overall, there are four analyses; namely, addition to Small Cap Index with respect to announcement insert ignore into journalissuearticles values(effective); day, deletion from Small Cap Index with respect to announcement insert ignore into journalissuearticles values(effective); day, addition to Standard Index with respect to announcement day insert ignore into journalissuearticles values(effective);, and deletion from Standard Index with respect to announcement day insert ignore into journalissuearticles values(effective);. The findings of the study present that index effect may appear or disappear, depending on the index, on which index reconstitution is being analyzed. Moreover, existence of the index effect is also subject to event day definition, which may be either announcement date or effective date of the index event.
Keywords : Index Effect, MSCI Index, Index Reconstitution, Event Study

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