The Impact of Changes in the Dow Jones Industrial Average List on Prices and Trading Volume

The price-pressure hypothesis (PPH) assumes that a temporary increase (or decrease) in returns and trading volumes occurs around the announcement day when firms are added to (or deleted from) a market index. On September 10, 2013, the Dow Jones Industrial Averages Index Committee announced that Goldman Sachs Group Inc. (GS), Visa Inc. (V) and Nike Inc. (NKE) would be added to the Dow Jones Industrial Average (DJIA) and Bank of America Corp. (BAC), Hewlett-Packard Co. (HPQ) and Alcoa Inc. (AA) would be deleted from the DJIA after the close of trading on September 20, 2013. According to the Index Committee, GS replaced BAC, V replaced HPQ and NKE replaced AA. This event study analyzes the effects that these changes have on the prices and volumes of these stocks. Changes of prices and trading volumes of the firms added to the DJIA are statistically significant enough to support the PPH