Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130787
Authors: 
Fernandes, Marcelo
Mergulhão, João
Year of Publication: 
2015
Series/Report no.: 
Working Paper, School of Economics and Finance, Queen Mary University of London 773
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.
Subjects: 
Imperfect substitutes
Index revision
Liquidity
Price pressure
JEL: 
G12
G15
C14
Document Type: 
Working Paper

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