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The effects of index changes in the Spain Stock Market

Authors
Disciplines
  • Political Science

Abstract

In the present study the price and volume effects changes to the Madrid Stock Exchange fs in Madrid is presented. Bolsa de Madrid (Madrid Stock Exchange) is the largest and most international of Spain's four regional stock exchanges (the others are located in Barcelona, Valencia, and Bilbao) that trade shares and convertible bonds and fixed income securities, also both government and private-sector debt. Bolsa de Madrid is owned by Bolsas y Mercados Espanoles. The researchers have found that the market reacts positively, to news of additions to the index, reflecting pressure on prices of concerned stocks. Trading volumes exhibit commensurate significant changes. While this finding warrants further examination, it leads us to the conclusion that the price effects noted with other index additions may result largely from the demand-supply disequilibrium caused by index, rather than any new information or certification signalled by index inclusion.

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