Information costs and liquidity effects from changes in the FTSE 100 list
In this paper we examine the stock price effect of changes in the composition of 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 firms increases. The evidence is consistent with the information cost/liquidity explanation. This is because investors hold stocks with more available information, implying that they have lower trading costs. This explains the increase in the stock price and trading volume of newly listed stocks to the FTSE 100 List. We find the reverse effect for the deletions from the FTSE 100.
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Volume (Year): 12 (2006)
Issue (Month): 4 ()
Pages: 347-360
| Handle: | RePEc:taf:eurjfi:v:12:y:2006:i:4:p:347-360 |
| Contact details of provider: | Web page: http://www.tandfonline.com/REJF20
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| Order Information: | Web: http://www.tandfonline.com/pricing/journal/REJF20 |
References listed on IDEAS
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- Shleifer, Andrei, 1986. " Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-90, July.
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Working papers
1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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- Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
- Pruitt, Stephen W & Wei, K C John, 1989. " Institutional Ownership and Changes in the S&P 500," Journal of Finance, American Finance Association, vol. 44(2), pages 509-13, June.
- Scholes, Myron S, 1972. "The Market for Securities: Substitution versus Price Pressure and the Effects of Information on Share Prices," The Journal of Business, University of Chicago Press, vol. 45(2), pages 179-211, April.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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