The Dynamic Impact of Market Reclassification Announcements on International Financial Markets Return

Using the event methodology, this study investigates the effects of market reclassification announcements on global stock markets using a sample of 23 stock market indices from developed and emerging countries. This study provides evidence for international stock markets responses to promotion or demotion in market classifications. According to the study findings, the news of a market reclassification has had a significant effect on stock market, with greater effect in the case of demotion versus promotion. The statistical findings show a significant relationship between the cumulative abnormal returns (CARs) and market reclassification. This suggests that changes in market classifications caused stock market reactions that affected future expectations and sentiments.