Asymmetric stock price and investor awareness reactions to changes in the Nasdaq 100 index

Biktimirov, Ernest N.; Xu, Yuanbin

doi:10.1057/s41260-019-00108-6

“…Combining all actual promotions (demotions) yields a highly significant positive (negative) 82bp (98bp) whereby the strongest moves occur in TecDAX and SDAX changes. Therefore, the announcement effect of index changes seems to still be present in the German equity market, which is consistent with international findings, such as in Kappou (2018) for the S&P 500 or in Biktimirov and Xu (2019) for the NASDAQ-100.…”

Section: Resultssupporting

confidence: 89%

“…Abnormal returns following the index change announcement are also found recently by others, such as Yu et al (2015) and Biktimirov and Xu (2019) for the USA., and Chen et al (2016) for the international equity markets. Chen et al (2004) find higher abnormal returns for additions than for deletions in the S&P 500 and link the difference to a change in investor awareness.…”

Section: Introductionsupporting

confidence: 70%

“…The abnormal returns for index changes following their announcement are large, not related to funding constraints, and even present in the largest stocks and most recent index changes. Considering that similar announcement effects are also found internationally (see Kappou et al (2010) or Biktimirov and Xu (2019)), most index methodologies are rule-based, and index This table shows mean and median of the difference between abnormal returns of actual changes that were correctly predicted and abnormal returns of actual changes that were not predicted by my model. The changes refer to index changes within the DAX family from 2010 to 2019.…”

Section: Resultsmentioning

confidence: 88%

See 1 more Smart Citation

Forecasting index changes in the German DAX family

Franz

¹

2020

J Asset Manag

2

0

View full text Add to dashboard Cite

Combining market data with a publicly available monthly snapshot of Deutsche Börse's index ranking list, I create a model that predicts index changes in the DAX, MDAX, SDAX, and TecDAX from 2010 to 2019 before they are officially announced. Even though I empirically show that index changes are predictable, they still earn sizeable post-announcement 1-day abnormal returns up to 1.42% and − 1.54% for promotions and demotions, respectively. While abnormal returns are larger in smaller stocks, I find no evidence that they are related to funding constraints or additional risk for trading on wrong predictions. A trading strategy that trades according to my model yields an annualized Sharpe ratio of 0.83 while being invested for just 4 days a year.

show abstract

“…Abnormal returns following the index change announcement are also found recently by others, such as Yu et al (2015) and Biktimirov and Xu (2019) for the USA., and Chen et al (2016) for the international equity markets. Chen et al (2004) find higher abnormal returns for additions than for deletions in the S&P 500 and link the difference to a change in investor awareness.…”

Section: Introductionsupporting

confidence: 70%

Forecasting Index Changes in the German DAX Family

Franz

¹

2019

SSRN Journal

0

View full text Add to dashboard Cite

Combining market data with a publicly available monthly snapshot of Deutsche Börse's index ranking list, I create a model that predicts index changes in the DAX, MDAX, SDAX, and TecDAX from 2010 to 2019 before they are officially announced. Even though I empirically show that index changes are predictable, they still earn sizeable post-announcement 1-day abnormal returns up to 1.42% and − 1.54% for promotions and demotions, respectively. While abnormal returns are larger in smaller stocks, I find no evidence that they are related to funding constraints or additional risk for trading on wrong predictions. A trading strategy that trades according to my model yields an annualized Sharpe ratio of 0.83 while being invested for just 4 days a year.

show abstract

“…As an example, the NASDAQ-100 index considers the largest non-financial companies listed on the Nasdaq stock market [26]. It is well-known [27,28] that changes in the composition of such indices have an impact on the stock prices, temporarily favouring the stocks that are added to the index.…”

Section: B Discrete Interacting Case: a Model Of A Financial Marketmentioning

confidence: 99%

Making sense of complex systems through resolution, relevance, and mapping entropy

Holtzman,

Giulini,

Potestio

2022

Preprint

View full text Add to dashboard Cite

Complex systems are characterised by a tight, nontrivial interplay of their constituents, which gives rise to a multi-scale spectrum of emergent properties. In this scenario, it is practically and conceptually difficult to identify those degrees of freedom that mostly determine the behaviour of the system and separate them from less prominent players. Here, we propose an analysis pipeline that integrates three measures of statistical information: resolution, relevance, and mapping entropy. This approach allows one first to identify, in a quantitative manner, the number of degrees of freedom of the system that preserve the largest information content about the generative process that governs it, then to select the specific subset of constituents that optimally provide a synthetic, yet informative reduced representation of the whole. The method, which is implemented in a freely available software, is fully general, as it is shown through the application to three very diverse systems, namely a toy model of independent binary spins, a coarse-grained representation of the financial stock market, and a fully atomistic simulation of a protein.

show abstract

Asymmetric stock price and investor awareness reactions to changes in the Nasdaq 100 index

Cited by 10 publications

References 39 publications

Forecasting index changes in the German DAX family

Forecasting index changes in the German DAX family

Forecasting Index Changes in the German DAX Family

Making sense of complex systems through resolution, relevance, and mapping entropy

Contact Info

Product

Resources

About