Price effects in the Chinese stock market: Evidence from the China securities index (CSI300) based on regression discontinuity.

• Unlike the traditional methodology that compares all firms that are included to the index with those that are not, the innovative use of RD utilizes small changes in rank which makes "apples to apples"comparison available. • China's stock markets have suffered dramatic uprush several times in recent years, and the regulations of stock indices is now criticized by some scholars and investors. Regarding policy implications, our work provides policymakers with new insights into the consequences of stock index adjustment in China. • Our work on the price effects provides a good direction for answering whether the investor structure have a significant but different impact on China's stock market, thus expanding the existing theoretical. In this study, we used regression discontinuity and difference-in-differences methods to verify whether price effects exist in the China Securities Index (CSI 300). Results suggest that the stocks included in this index had an extra abnormal rate of return of approximately 15% compared with the control group. Furthermore, the excluded stocks had a negative abnormal return of approximately 10% before the exclusion announcement, which reversed after the announcement. However, the price effects of the excluded stocks were not significant. Overall, the results indicate that price effects in the CSI 300 are asymmetrical. [ABSTRACT FROM AUTHOR]