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The price effects of FTSE 100 index revision: what drives the long-term abnormal return reversal?

Mazouz, Khelifa and Saadouni, Brahim 2007. The price effects of FTSE 100 index revision: what drives the long-term abnormal return reversal? Applied Financial Economics 17 (6) , pp. 501-510. 10.1080/09603100600690085

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Abstract

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.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Publisher: Routledge
ISSN: 0960-3107
Last Modified: 04 Jun 2017 06:32
URI: http://orca.cf.ac.uk/id/eprint/61684

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