The Impact of Changes in the FTSE 100 Index

Bryan Mase

The Financial Review, 2007, vol. 42, issue 3, 461-484

Abstract: This paper investigates FTSE 100 index membership changes, which are determined quarterly by market capitalization and should have no information content. Return reversal around index additions and deletions suggests that buying (selling) pressure moves prices temporarily away from equilibrium, consistent with short‐term downward sloping demand curves. In contrast to widely reported results for the S&P 500, there is no evidence of permanent price effects. Further results suggest that investor awareness and monitoring due to index membership do not explain the price effects. There is statistically significant anticipatory trading in stocks that just fail to be promoted to the FTSE 100.

Date: 2007
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https://doi.org/10.1111/j.1540-6288.2007.00179.x

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