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Title: The impact of changes in the FTSE 100 index
Authors: Mase, B
Keywords: Index trackers;Liquidity;Listing;Long-run performance
Issue Date: 2002
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 02-25
Abstract: This paper examines both the long-term and short-term impact associated with changes in the constituents of the FTSE 100 Index. We find that stocks exhibit positive (negative) abnormal long-run performance following their inclusion in (deletion from) the index. There is also evidence of significant short-term cumulative abnormal returns around the event. The reversal of these price effects suggests that short-term buying (selling) pressure (possibly from index trackers) moves prices temporarily away from equilibrium. An analysis of stock liquidity implies speculators may trade in advance of the announcement, while index trackers trade between the announcement and event dates. Finally, the organisation of the FTSE 100 Index enables us to conduct an analysis of stocks that just avoid being relegated from (fail to be promoted to) the FTSE 100.
Appears in Collections:Dept of Economics and Finance Research Papers

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