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

Yildiz, Y., Karan, M.B., Pirgaip, B. (2017) Market reaction to grouping equities in stock markets: An empirical analysis on Borsa Istanbul. Borsa Istanbul Review, 17 (4). pp. 216-227. ISSN 2214-8450. (doi:10.1016/j.bir.2017.08.001) (KAR id:100062)


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.

Item Type: Article
DOI/Identification number: 10.1016/j.bir.2017.08.001
Uncontrolled keywords: Equity grouping, Regulation, Price and volume effects
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: Hacettepe University (
Depositing User: Yilmaz Yildiz
Date Deposited: 17 Feb 2023 12:41 UTC
Last Modified: 20 Feb 2023 15:27 UTC
Resource URI: (The current URI for this page, for reference purposes)

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