Co-Movement and Index Changes - Evidence from The Emerging Indian Stock Market

Abstract

This study investigates the return co-movement around the benchmark Nifty index changes for the period 1999-2010 in the Indian stock market. We find evidence of significant increase in co-movement between the added stocks and the Nifty index subsequent to additions to the benchmark Nifty index. On the contrary stocks deleted from the Nifty index do not evidence decreased co-movement between the deleted stocks and the Nifty index. We have employed various methodologies used by Vijh(1994), Barberis et al(2002) and Greenwood and Sosner (2002) and the results suggest that the information related views explain the Nifty index changes in the emerging Indian stock market.