Trading Patterns and Excess Comovement of Stock Returns
Author | : Nathan Sosner |
Publisher | : |
Total Pages | : |
Release | : 2009 |
ISBN-10 | : OCLC:1290852410 |
ISBN-13 | : |
Rating | : 4/5 (10 Downloads) |
Download or read book Trading Patterns and Excess Comovement of Stock Returns written by Nathan Sosner and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In April 2000, 30 stocks were replaced in the Nikkei 225 Index. The unusually broad index redefinition allowed for a study of the effects of index-linked trading on the excess comovement of stock returns. A large increase occurred in the correlation of trading volume of stocks added to the index with the volume of stocks that remained in the index, and opposite results occurred for the deletions. Daily index return betas of the additions rose by an average of 0.45; index return betas of the deleted stocks fell by an average of 0.63. Theoretical predictions for changes in autocorrelations and cross-serial correlations of returns of index additions and deletions were confirmed. The results are consistent with the idea that trading patterns are associated with short-run excess comovement of stock returns.