Market reaction to grouping equities in stock markets: An empirical analysis on Borsa Istanbul

Yilmaz Yildiz, Mehmet Baha Karan, Burak Pirgaip

Research output: Contribution to journalArticle

Abstract

The main aim of this study is to investigate the market reaction to stock grouping announcements in Borsa Istanbul which requires stocks to be classified into groups “A”, “B” and “C” according to their market capitalization and floating rates. By utilizing event study analysis, our results suggest that grouping announcements have significant effect on stock prices and trading volume. The event day positive (negative) relationship between abnormal return and volume for the upgraded (downgraded) stocks supports the downward sloping demand curve hypothesis. Moreover, findings also suggest that stocks which are upgraded to Group A are exposed to more attention which is in line with the attention hypothesis. The reverse is valid for the downgraded firms. We find no evidence of price reversals and long-term symmetrical liquidity effect which lead us to reject price pressure and liquidity hypotheses. Finally, we reach controversial evidence for the information hypothesis.

LanguageEnglish
Pages216-227
Number of pages12
JournalBorsa Istanbul Review
Volume17
Issue number4
Early online date12 Aug 2017
DOIs
Publication statusPublished - Dec 2017
Externally publishedYes

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Grouping
Empirical analysis
Market reaction
Stock market
Equity
Announcement
Liquidity effect
Stock prices
Event study analysis
Price reversal
Demand curve
Abnormal returns
Trading volume
Market capitalization
Floating
Price pressure
Liquidity

Cite this

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Market reaction to grouping equities in stock markets : An empirical analysis on Borsa Istanbul. / Yildiz, Yilmaz; Karan, Mehmet Baha; Pirgaip, Burak.

In: Borsa Istanbul Review, Vol. 17, No. 4, 12.2017, p. 216-227.

Research output: Contribution to journalArticle

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