TY - JOUR
T1 - The price effects of FTSE 100 index revision
T2 - What drives the long-term abnormal return reversal?
AU - Mazouz, Khelifa
AU - Saadouni, Brahim
PY - 2007/3/1
Y1 - 2007/3/1
N2 - We examine short- and the long-term price effect associated with the FTSE 100 index revisions. We control for both heteroskedastic nature of the residual and the change, between the estimation and the test period, in the beta coefficient of the standard market model. Our findings reveal no relationship between the long-term price reversals and the change in the discount rate, as approximated by the beta coefficient of the market model. Overall, we provide strong evidence in favour of the price pressure hypothesis, where the price increase (decrease) gradually starting before the announcement an inclusion (exclusion) and reverses completely in less than two weeks after the index revision date.
AB - We examine short- and the long-term price effect associated with the FTSE 100 index revisions. We control for both heteroskedastic nature of the residual and the change, between the estimation and the test period, in the beta coefficient of the standard market model. Our findings reveal no relationship between the long-term price reversals and the change in the discount rate, as approximated by the beta coefficient of the market model. Overall, we provide strong evidence in favour of the price pressure hypothesis, where the price increase (decrease) gradually starting before the announcement an inclusion (exclusion) and reverses completely in less than two weeks after the index revision date.
UR - http://www.scopus.com/inward/record.url?scp=33947381803&partnerID=8YFLogxK
U2 - 10.1080/09603100600690085
DO - 10.1080/09603100600690085
M3 - Article
AN - SCOPUS:33947381803
SN - 0960-3107
VL - 17
SP - 501
EP - 510
JO - Applied Financial Economics
JF - Applied Financial Economics
IS - 6
ER -