Study On The Impact Of China's A-share Inclusion In MSCI Emerging Market Index

On June 1,2018,Morgan Stanley Capital International announced that 226 Chinese A-share would be included in the MSCI Emerging Market Index,which is a milestone in the internationalization of A-share.This paper analyzes 226 A-share included in the MSCI Emerging Market Index and other A shares not included in the MSCI Emerging Market Index,in-depth analysis of the impact of this event on China's A-share market.At the same time,226 A-share industries to be included will be compared to analyze the impact of the event on different industries.The main research methods of this paper are theoretical analysis and empirical analysis.The theoretical analysis mainly uses the literature research method,and finds that the number of Chinese A-share included in MSCI index is less in previous literature studies,and the literature about Chinese A-share included in the MSCI Emerging Market Index focuses on the qualitative impact.Therefore,the empirical research of this paper will use the event study method,analysis the impact of MSCI Emerging Market Index on A-share listed companies and whether it has different impact on different industries.Through this study,the following conclusions are drawn:(1)the MSCI Emerging Market Index has a significant effect on the included underlying stock prices.The cumulative abnormal returns of the underlying companies in the three event windows(-1,+ 1),(-1,+ 3),and(-1,+ 7)were significantly positive after inclusion in the MSCI emerging markets index.(2)For A-share not included in the MSCI index,the cumulative abnormal returns in the three event windows(-1,+1),(-1,+3)and(-1,+7)are all negative,indicating that there is no significant positive spillover effect.(3)From the perspective of specific industries,electrical equipment,household appliances,food and beverage,medicine and biology,agriculture,forestry,animal husbandry and fishery industries are most affected by this event,and have significantly larger cumulative abnormal rate of return.(4)In terms of the timelinessof the event impact,this event has a strong short-term stimulus.Under this kind of stimulation,a large number of overseas investors entering A-share market,which causes the yield to fluctuate greatly.But the impact of inclusion events will decline over time.