This paper examines the impact of a change of focus by a firm, as signified by a firm's stock market reclassification. It distinguishes between a firm's sector reclassification motivated by information specific to that firm and one that results from the redefinition and reorganisation of a sector. The direction of the price effects following reclassification depends significantly upon this distinction. Furthermore, a stock's return comovement with the FTSE All-Share Index is affected by its reclassification into a new sector, consistent with the allocation of stocks into categories by investors. Reclassification can induce common factors in the returns to stocks in an index without there being any change in these stocks' fundamental cash flows.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.