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Quantitative Finance · Begrippenlijst

Wat is Index effect?

Definition 15.12 Markets I: The Ecosystem and Exchange-Traded Markets · Hoofdstuk 15 — Index Construction and Rebalancing

The index effect is the abnormal return of a stock between the announcement of its addition to (or deletion from) an index and the effective date, together with its partial reversal afterwards.

A stylised addition, in cumulative abnormal return: a jump at the announcement (day -5), a run-up to the effective close, a partial reversal. Only the two heights at day 0 are published averages; the shapes, the split between permanent and temporary parts and the speed of the reversal are illustrative.
Figure 15.4. A stylised addition, in cumulative abnormal return: a jump at the announcement (day −5-5), a run-up to the effective close, a partial reversal. Only the two heights at day 0 are published averages; the shapes, the split between permanent and temporary parts and the speed of the reversal are illustrative.
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