Impact of changes in the CSI 300 Index constituents

We investigate the price and trading volume effects of CSI 300 Index reconstitutions. In contrast to the Standard & Poor's (S&P) 500 Index, whose reconstitutions are carried out irregularly, as required, CSI 300 Index reconstitutions are scheduled semi-annually and performed based on predetermined rules. We find that, on average, prices increase (decrease) significantly for CSI 300 Index additions (deletions) followed by significant post-event price reversals; however, these price changes are less in magnitude than evidenced in extant research for the S&P 500 Index. The trading volume increases significantly for both CSI 300 Index additions and deletions in the short run. The trading volume subsequently reverts to normal levels for index additions but remains higher for index deletions. The findings are consistent with the price pressure hypothesis.