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The Anatomy of Index Rebalancings : Evidence from Transaction Data / Mariana Escobar.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Escobar, Mariana.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Arbitrage.
- Capital Markets and Capital Flows.
- Demand Elasticity.
- Finance and Financial Sector Development.
- Financial Regulation and Supervision.
- Index Rebalancing.
- Institutional Investor.
- Mutual Funds.
- Non Bank Financial Institutions.
- Passive Fund.
- Securities Markets Policy and Regulation.
- Stock Market Index.
- Local Subjects:
- Arbitrage.
- Capital Markets and Capital Flows.
- Demand Elasticity.
- Finance and Financial Sector Development.
- Financial Regulation and Supervision.
- Index Rebalancing.
- Institutional Investor.
- Mutual Funds.
- Non Bank Financial Institutions.
- Passive Fund.
- Securities Markets Policy and Regulation.
- Stock Market Index.
- Physical Description:
- 1 online resource (26 pages)
- Other Title:
- Anatomy of Index Rebalancings
- Place of Publication:
- Washington, D.C. : The World Bank, 2021.
- System Details:
- data file
- Summary:
- 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.
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