Anticipatory effects in the FTSE 100 index revisions

Marcelo Fernandes and João Mergulhão

Journal of Empirical Finance, 2016, vol. 37, issue C, 79-90

Abstract: This paper examines the price impact of trading due to expected changes in the FTSE 100 index composition, which employs publicly-known objective criteria to determine membership. Hence, it provides a natural context to investigate anticipatory trading effects. We propose a panel-regression event study that backs out these anticipatory effects by looking at the price impact of the ex-ante probability of changing index membership status. Our findings reveal that anticipative trading explains about 40% and 23% of the cumulative abnormal returns of additions and deletions, respectively. The results are both statistically and economically significant.

Keywords: Imperfect substitutes; Index revision; Liquidity; Price pressure (search for similar items in EconPapers)
JEL-codes: C14 G12 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Anticipatory Effects in the FTSE 100 Index Revisions (2015)
Working Paper: Anticipatory effects in the FTSE 100 index revisions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:37:y:2016:i:c:p:79-90

DOI: 10.1016/j.jempfin.2016.02.009

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