J. Polonchek et T. Krehbiel, PRICE AND VOLUME EFFECTS ASSOCIATED WITH CHANGES IN THE DOW-JONES AVERAGES, The Quarterly review of economics and finance, 34(4), 1994, pp. 305-316
This study compares the price and volume responses associated with cha
nges in the roster of the Dow Jones Industrial and Transportation Aver
ages with previous research investigating changes in the rosters of th
e Standard and Poor's stock indices. Event period abnormal returns and
daily trading volume for firms added to the Averages are consistent w
ith Merton's (1987) attention hypothesis. Firms added to the roster of
the Industrial Average experience positive significant abnormal retur
ns and significantly greater trading volume on the event date. Firms a
dded to the Transportation Average, an event which receives much less
media attention, experience neither event period abnormal returns nor
increased trading volume. Firms dropped from both Averages experience
neither event period abnormal returns nor increased trading volume.