KOSPI 200 Index Inclusion and Investor's Trading Behavior
This study examines the KOSPI 200 index inclusion event with a matching
firm approach using average treatment effect. We test five hypotheses by
investigating stock price effect and investor's trading behavior.
The results are as follows. First, We find significant positive abnormal returns
from the announcement date(AD), but the effect reversed after the inclusion
date(CD). Second, abnormal trading volume temporarily increased until including
date, it declined since then. Bid-ask Spread adversely increased in the including
date and it decreased afterwards. Tobin's Q, ROA, number of shareholders and
shadow cost increased after including date, but these are not significant
difference with matching firm.
Third, individual investors are net sellers before and after AD. Institutional
investors are net sellers before AD, but are switched to net buyers thereafter
for a long period of time. On the other hand, foreign investors are net buyers
before CD, but are switched to net seller thereafter for a short period of time.
Therefore, the positive abnormal returns at AD are attributable to net buying
position of institutional and foreign investors. In addition, the price reversal after
CD is found to be due to foreign investors' net selling and decrease in net
buying of institutional investors.
Our results indicate that KOSPI 200 index inclusion effect is derived from
temporary increase in demand by institution investors and foreign investors.
Finally, our findings clearly support to the price pressure hypothesis.

Kwon, Taek Ho, Pyung Sig Yoon and Byung Kwon Lim(2014), "KOSPI 200 Index Inclusion and Investor's Trading Behavior", The Korean Journal of Financial 
       Engineering, 13(2), 1-29. 

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