Cover IMF Working Papers
Additions to Market Indices and the Comovement of Stock Returns Around the World
Author: Yishay Yafeh1 and Mr. Stijn Claessens
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund
Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 047
Language:
English
Publication Date:
01 Mar 2011
DOI:
https://doi.org/10.5089/9781455218950.001
ISBN:
9781455218950
ISSN:
1018-5941
Pages:
34
Keywords:
WP; inclusion effect; inclusion comovement; stock price; Index concentration; inclusion increase
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Using newly-constructed data covering the last decade, we document that, in most of forty markets, when added to the main index, firms’ returns experience an increase in comovement with the rest of the index, reflected in higher beta and greater explanatory power of the market return. Stock turnover and analyst coverage also typically increase upon inclusion. Using various tests, we find the demand-based view of comovement (the category/habitat theories of Barberis, Shleifer and Wurgler, 2005) to provide a good explanation for many of our findings. Some results, though, suggest that information-related factors are also important in explaining the increased comovement.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund

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