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Greetings there friends,

I am doing a small research on the effects of the event of inclusion and exclusion of a stock from DAX indices (german indices), to cut the story short, i have downloaded data from the Thompson Reuters Datastream platform for more than 140 german companies from 2005 up to 2020 and their inclusion/exclusion announcement and effective dates, when i undergo the event study and run the regressions by using a market model, which is pretty much the benchmark model, I get negative significant returns around the event date (event window) for the event of inclusion and positive for the event of exclusion.

Does anyone have any idea why would this happen, most event studies on stocks' inclusions in the S&P500 and US indices show that stocks show positive returns within the event window for the event of inclusion and negative for the event of exclusion.

Thanks in Advance.

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    $\begingroup$ Interesting discovery! $\endgroup$ – noob2 May 9 at 16:20
  • $\begingroup$ do you have any idea what could the theoretical justifications for that be, i am kind of at loss here. $\endgroup$ – AugusteDupin May 9 at 16:28
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    $\begingroup$ That is indeed interesting. Almost unbelievable especially with all the ETFs buying automatically. In my opinion, without seeing the entire work, this will be hard to explain or verify (unless someone else found the same). I would say you cannot possible have done it right; but on the other hand that was also what people said to Rogoff and Meese. Have you simply computed returns without a model as well? $\endgroup$ – AKdemy May 9 at 21:57
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    $\begingroup$ Interesting question and observation. Some other guys found this in their reserach: lutpub.lut.fi/bitstream/handle/10024/162543/… (this is a master's thesis) and the person is referring to another paper by F. Franz in the Journal of Asset Management: search.proquest.com/docview/2378450278 $\endgroup$ – Kermittfrog May 10 at 8:11
  • $\begingroup$ thank you very much, i will check those references. $\endgroup$ – AugusteDupin May 10 at 13:13

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