Anticipatory effects in the FTSE 100 index revisions

Autor(es)

Fernandes, Marcelo ^{[1, 2]} ; Mergulhao, Joao ^[1]

Afiliação do(s) autor(es)

^[1] FGV, Sao Paulo Sch Econ, Rua Itapeva 474, Off 1212, BR-01322000 Sao Paulo, SP - Brazil

^[2] Queen Mary Univ London, London - England

• Tipo de documento: Artigo Científico
• Fonte: JOURNAL OF EMPIRICAL FINANCE; v. 37, p. 79-90, JUN 2016.
• Citações Web of Science: 2

Resumo

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. (C) 2016 Elsevier B.V. All rights reserved. (AU)

• Processo FAPESP: 13/22930-0 - Descoberta de preços em carteiras de arbitragem de alta dimensão
• Beneficiário: Pedro Luiz Valls Pereira
• Modalidade de apoio: Auxílio à Pesquisa - Temático