Playing Footsy with the Ftse 100 Index

42 Pages Posted: 22 Mar 2005

See all articles by Jay Dahya

Jay Dahya

Zicklin School of Business, Baruch College - The City University of New York

Date Written: January 11, 2006

Abstract

Studies on S&P 500 Index changes are unable to reject index compiler certification in explaining permanent stock price effects to index additions. The FTSE 100 Index comprises one hundred stocks ranked highest by market capitalization, and therefore precludes certification. FTSE 100 Index additions elicit a permanent positive stock price effect, whilst deletions reveal a rebound following announcement period losses. Both price effects can be explained by changes in earnings expectations, information production, and investor awareness. These results challenge belief that index changes (absent certification) are information-free events and long-run demand curves for stocks slope downward.

Keywords: Equity, Index, FTSE 100

JEL Classification: G15, G11, G12, G10

Suggested Citation

Dahya, Jay, Playing Footsy with the Ftse 100 Index (January 11, 2006). Available at SSRN: https://ssrn.com/abstract=687465 or http://dx.doi.org/10.2139/ssrn.687465

Jay Dahya (Contact Author)

Zicklin School of Business, Baruch College - The City University of New York ( email )

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New York, NY 10010
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