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A Flexible and Customizable Method for Assessing Cognitive Abilities

Author

Listed:
  • Terence C. Burnham

    (Chapman University Argyros School of Business and Economics)

  • Harry Gakidis

    (Acadian Asset Management)

  • Jeffrey Wurgler

    (NYU Stern School of Business and NBER)

Abstract

Approximately $10 trillion is benchmarked to Morgan Stanley Capital International’s Developed, Emerging, Frontier, and standalone market indexes. Reclassifications from one index to another require thousands of investors to decide how to react. We study a comprehensive sample of past reclassifications to guide this decision. Reclassified markets’ prices substantially overshoot between the announcement and effective dates— prices fall when a market moves from an index with more benchmarked ownership to one with less, such from Emerging to Frontier, and viceversa—but revert within a year. We identify alpha-maximizing responses to reclassifications for both tightly benchmarked and more flexible investors.

Suggested Citation

  • Terence C. Burnham & Harry Gakidis & Jeffrey Wurgler, 2017. "A Flexible and Customizable Method for Assessing Cognitive Abilities," Working Papers 17-10, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:17-10
    as

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    References listed on IDEAS

    as
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