Information efficiency changes following FTSE 100 index revisions .pdf (1.05 MB)
Information efficiency changes following FTSE 100 index revisions
journal contributionposted on 2014-06-26, 10:38 authored by Wael Daya, Khelifa Mazouz, Mark Freeman
This 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.
- Business and Economics
Published inJOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEY
Pages1054 - 1069 (16)
CitationDAYA, 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 - 1069
Publisher© Elsevier B.V.
- AM (Accepted Manuscript)
NotesThis 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.2012.01.002