Volume 16, Number 1, June 2021
| Effects of Inclusion of China A-shares into the MSCI indexes on Prices and Volumes |
Abstract
The inclusion of A shares into the MSCI indicates the gradual recognition by international investors for China’s efforts in the reforms and liberalization of its capital markets. It is expected that more overseas investors and institutions will enter the Chinese capital market. The observations of the paper are the A shares that were included into MSCI indexes and the event study method is applied to explore whether there are abnormal returns and abnormal volume turnovers on announcement dates and implementation dates of events. Quantile regressions are conducted to examine the factors that influence cumulative abnormal returns after the outbreak of the China-US trade war. The empirical evidence indicates significant abnormal returns and abnormal volume turnovers both on announcement day and implementation day of events. The quantile regression analysis suggests that imposition of tariffs and sales from overseas are the two factors that influence cumulative abnormal returns after the eruption of the China-US trade war. The findings of this paper can serve as a reference to investors in buying and selling stocks in response to any change to index constituents. It is suggested that the government should provide timely information regarding economic policies and consider the impact of import duties in the policy making process.
Keywords: MSCI Index, China A Shares, Abnormal Return, Abnormal Volume Turnover, Quantile Regression
JEL Classification: G14, G23