The Anatomy of Index Rebalancings

• Tác giả: Mariana Escobar
• Ngôn ngữ: eng
• Ký hiệu phân loại: 029.5 [Unassigned]
• Thông tin xuất bản: World Bank, Washington, DC, 2021
• Bộ sưu tập: Tài liệu truy cập mở
• ID: 318634
• Chủ đề: 1. ARBITRAGE; 2. INDEX REBALANCING; 3. INSTITUTIONAL INVESTOR; 4. PASSIVE FUND; 5. STOCK MARKET INDEX

Tóm tắt

This paper exploits a novel dataset covering the universe of transactions in the Colombian Stock Exchange to analyze episodes of additions to and deletions from MSCI equity indexes. The analysis finds that additions and deletions have large price effects: the median cumulative abnormal return in absolute value is 5.5 percent. The paper shows that these price effects are due to large demand shocks by different classes of international investors-not only passive funds and ETFs, but also active mutual funds, pension funds and government funds-which are not absorbed by arbitrageurs. Consistent with recent asset pricing models with limits to arbitrage, stock demand curves are estimated to be very inelastic: the demand elasticity for the median stock in the sample is −0.34, implying that a 1 percent increase in the demand for the stock increases its price by 2.9 percent.