Liquidity Effects due to Information Costs from Changes in the FTSE 100 List

Andros Gregoriou () and Christos Ioannidis ()

Economics and Finance Discussion Papers from Economics and Finance Section, School of Social Sciences, Brunel University

Abstract: In this paper we examine effect on the returns of firms that have been included to and deleted from the FTSE 100 over the time period of 1984-2001. Like the S&P 500 listing studies, we find that the price and trading volume of newly listed (deleted) firms increases (decreases). The evidence is consistent with the information cost/liquidity explanation. This is because investors hold stocks with more (less) available information, consequently implying that they have lower (higher) trading costs. This explains the increase (decrease) in the stock price and trading volume of newly listed (deleted) stocks to (from) the FTSE 100 List.

Pages: 30 pages
Date: 2003-01
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Working Paper: Liquidity Effects due to Information Costs from Changes in the FTSE 100 List (2003)
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