The long-run development of index revision effects in Europe: Evidence from the STOXX Europe 50 and STOXX Europe 600

This thesis studies the long-run development of index revision effects in Europe using data from the STOXX Europe 50 and STOXX Europe 600 indices over nearly three decades. Abnormal returns around index additions and removals are estimated using a multifactor asset pricing model. The results provide clear evidence of index effects and subsequent price reversals in both indices. For the STOXX Europe 600, these effects appear to have increased in both magnitude and statistical significance over time. In contrast, the time trend of index effects in the STOXX Europe 50 is less clear, with weaker and less consistent evidence across periods.