Do the Price Effects of Stock Market Index Exist?——New Evidence from HS300 with Regression Discontinuity
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| Title | Do the Price Effects of Stock Market Index Exist?——New Evidence from HS300 with Regression Discontinuity
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| Author | Yao Dongmin,Zhang Risheng and Li Jiasheng |
| Organization | Central University of Finance and Economics |
| Email | yaodongminn@163.com；maszrs@126.com；jansonleeljs@126.com |
| Key Words | Price Effects of Index ; Natural Experiment ; RD ; DID ; Distribution of Abnormal Rate of Return |
| Abstract | Arguments about price effects of index exist all the time, especially with Chinese HS300 index. While the conclusions are controversial, this paper finds out it might be caused by the method of estimating index effects. Beneish and Whaley (1996) argued that the index effects have become the S&P game (arbitrage game). We use regression discontinuity to examine the index effects and difference-in-difference model, together with distribution test of abnormal rate of return, as a robust test. The changing policy of HS300 offers an excellent natural experiment. Results suggest that the included stocks have an extra ARR about 15%, comparing with the control group. The excluded stocks have a negative ARR about 10% before announcement (comparing with control group), which reverse after the announcement. But the excluded price effect isn’t significant. The price effects of HS300 are asymmetrical. |
| Serial Number | WP1132 |
| Time | 2016-11-22 |
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