Information efficiency changes following FTSE 100 index revisions .pdf (1.05 MB)
Information efficiency changes following FTSE 100 index revisions
journal contribution
posted on 2014-06-26, 10:38 authored by Wael Daya, Khelifa Mazouz, Mark FreemanThis study examines the impact of FTSE 100 index revisions on the informational efficiency of the underlying stocks. Our study spans the 1986–2009 period. We estimate the speed of price adjustment and price inefficiency from the partial adjustment with noise model of Amihud and Mendelson (1987). We report a significant improvement (no change) in the informational efficiency of the stocks added to (deleted from) the FTSE 100 index. The asymmetric effect of additions and deletions on informational efficiency can be attributed, at least partly, to certain aspects of liquidity and other fundamental characteristics, which improve following additions but do not diminish after deletions. Cross-sectional analysis also indicates that stocks with low pre-addition market quality benefit more from joining the index.
History
School
- Business and Economics
Department
- Business
Published in
JOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEYVolume
22Issue
4Pages
1054 - 1069 (16)Citation
DAYA, W., MAZOUZ, K. and FREEMAN, M., 2012. Information efficiency changes following FTSE 100 index revisions. Journal of International Financial Markets, Institutions and Money, 22 (4), pp. 1054 - 1069Publisher
© Elsevier B.V.Version
- AM (Accepted Manuscript)
Publication date
2012Notes
This article was published in the Journal of International Financial Markets, Institutions and Money [© Elsevier B.V.] and the definitive version is available at: http://dx.doi.org/10.1016/j.intfin.2012.01.002ISSN
1042-4431Publisher version
Language
- en