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Title: Information efficiency changes following FTSE 100 index revisions
Authors: Daya, Wael
Mazouz, Khelifa
Freeman, Mark
Keywords: Index revisions
Market quality
Liquidity
Issue Date: 2012
Publisher: © Elsevier B.V.
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 - 1069
Abstract: 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.
Description: 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.2012.01.002
Version: Accepted for publication
DOI: 10.1016/j.intfin.2012.01.002
URI: https://dspace.lboro.ac.uk/2134/15026
Publisher Link: http://dx.doi.org/10.1016/j.intfin.2012.01.002
ISSN: 1042-4431
Appears in Collections:Published Articles (Business School)

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