Model predicts stock index changes, revolutionizing investment strategies worldwide.
Stock index changes can have big impacts on investors. A model-driven approach was used to predict changes in index membership by combining index rules with market capitalization models. The study focused on Germany's DAX and MDAX indexes in 2021, looking at the number of index members and admission criteria. The research found that abnormal returns and trading volumes occur around index change dates, known as the "index effect".