Trading the changes of stock market index composition: Evidence from European markets

This paper studies the changes in European stock market indexes composition from 1995 to 2015. It was found that there are mixed price effects producing abnormal returns around the effective replacement of added and deleted stocks. The price pressure hypothesis seems to hold for added stocks in some indexes but not for deleted stocks as there is not a clear inversion of behaviour after the replacement. Finally, the building and back testing of a trading strategy aiming to capture some of those abnormal returns shows it yields a Sharpe Ratio of 1.4 and generates an annualised alpha of 11%.

Exchange rate pressure in Angola

The objective of this work is to develop an operational tool to analyze exchange rate pressure in the context of Angola. The Angolan economy exhibits a number of relevant characteristics: a closed financial account, a partially controlled current account, a highly dollarized economy and exports (oil) price determined in World markets. These features have a direct effect on the demand of foreign currency and motivate their inclusion in the specification of a model for Angola. The model provides the rational for a measure of an exchange market rate pressure (EMP) index that contains exports changes, imports changes, the foreign interest rate and inflation and the change in foreign reserves corrected for a measure dollarization. The empirical performance new measure is comparable (slightly better) to the performance of the EMP indexes obtained in Eichengreen Rose and Wyplosz (1994) and Klassen and Jager (2011).