Addition to the Nikkei 225 Index and Japanese Market Response: Temporary Demand Effect of Index-arbitrageurs

要約

We examine the Japanese stock market response to addition to the Nikkei 225 Index during the period from 1991 to 2002. Much as in the case of the U.S. markets, the stock prices of added firms go up on the announcement date, continue to increase until one day prior to the effective change date, and then decrease on the change date. We identify that the stock price increase in the run-up period (between the announcement date and the change date) is temporary, because it is completely canceled out by the stock price decline following the change date. We also find that the excess demand of index-arbitrageurs for shares of newly added firms is the main source of the temporary stock price increase.