Article

Comovement After Joining an Index: Spillovers of Nonfundamental Effects

University of Kentucky, Lexington, Kentucky, United States
Real Estate Economics (Impact Factor: 1.02). 03/2007; 35(1):57-90. DOI: 10.1111/j.1540-6229.2007.00182.x
Source: RePEc

ABSTRACT

This study considers the case of two overlapping categories in the context of recent category models. Specifically, we examine whether investor sentiment and market frictions specific to one category can affect the returns on assets belonging to the other category. With recent additions of several real estate investment trusts (REITs) into general stock market indices as a natural experiment, we find support for spillovers of such nonfundamental effects, as evidenced by the increased return correlation between REITs that remain outside the index and the index stocks. Further analysis reveals that market frictions play a greater role than investor sentiment. Copyright 2007 American Real Estate and Urban Economics Association

Download full-text

Full-text

Available from: Brent Ambrose
  • Source
    • "Secara umum, hasil penelitian tersebut mengkonfirmasi pandangan adanya kesamaan gerak yang disebabkan oleh faktor non-fundamental perusahaan. Fenomena kesamaan gerak dijumpai juga pada saham karena efek intra industri dan intra kategori (Ambrose et al., 2007 dan serta Charter, 2011). Unit analisis penelitian terdiri dari 6 indeks, yaitu LQ45, JII, Kompas 100, Bisnis 27, Pefindo 25, dan SRI-KEHATI. "
    [Show abstract] [Hide abstract]
    ABSTRACT: One of basic tenets in behavioral finance is the existence of investor biases in the market. Of the ways that can be used to track investor biases in the market is through comovement phenomenon. While traditional finance assumes that comovement can exist due to fundamental relationship among assets, behavioral finance contends that comovement can exist due to noise relationship. This study tests comovement phenomenon in the context of index rebalancing in Indonesia using the model proposed by Barberis, Shleifer, and Wurgler. In contrast to those in developed countries, the results can not solidly prove that comovement phenomenon around index rebalancing appears in Indonesia. Comovement patterns are identified in LQ45 and JII although statistically not significant. Such identified patterns more consistent with behavioral-based explanations that are habitat and category views from Barberis et al.
    Full-text · Article · Dec 2014
  • Source
    • "Glascock et al., 2000, Clayton & MacKinnon, 2001 and Case et al., 2010) and the nature of REIT systematic risk (e.g. Crain et al., 2000, Feng et al, 2006, Ambrose et al., 2007). "
    [Show abstract] [Hide abstract]
    ABSTRACT: This study uses a bootstrap methodology to explicitly distinguish between skill and luck for 80 Real Estate Investment Trust Mutual Funds in the period January 1995 to May 2008. The methodology successfully captures non-normality in the idiosyncratic risk of the funds. Using unconditional, beta conditional and alpha-beta conditional estimation models, the results indicate that all but one fund demonstrates poor skill. Tests of robustness show that this finding is largely invariant to REIT market conditions and maturity.
    Full-text · Article ·
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper provides evidence of industry information effects and portfolio rebalancing effects that occur when stocks are added to, or excluded from, the S&P 500 Index. Incumbent firms in the index experience negative excess returns when S&P revises the composition of the index. However, for incumbent index firms that are in the same industry as the added firm, the price pressure effects are mitigated by positive industry information effect. For exclusions, the magnitude of the loss sustained by the incumbent industry peers is larger than that experienced by the non-industry index incumbents, as negative industry information effect reinforces the price pressure effect for peers that are in the same industry. While the evidence is consistent with the existence of information and portfolio rebalancing effects; the portfolio rebalancing effects appear to dominate the information effects. Overall, our results suggest that S&P 500 Index composition changes are not information-free events.
    Full-text · Article ·
Show more