Comovement and Ftse 100 Index Changes

33 Pages Posted: 4 Mar 2005

See all articles by Periklis Kougoulis

Periklis Kougoulis

London Metropolitan University, Department of Economics, Finance and International Business

Jerry Coakley

University of Essex - Essex Business School

Date Written: February 2005

Abstract

We employ the Barberis, Shleifer and Wurgler (2005) methodology to investigate the impact of changes to the FTSE 100 index on return comovement 1992-2002. For FTSE entries, the average weekly increase in the beta coefficient is 0.38 in univariate regressions and 0.60 in bivariate regressions that control for the return on non-FTSE stocks. Stocks deleted from the index display the opposite pattern post exit. The results are robust to a number of factors including size, industry and non-trading effects. They are difficult to explain within a classical framework but complement those found for the US and Japan in supporting behavioral finance views of comovement.

Keywords: Behavioral finance, trading-based comovement, index funds

JEL Classification: G11, G12, G14

Suggested Citation

Kougoulis, Periklis and Coakley, Jerry, Comovement and Ftse 100 Index Changes (February 2005). EFMA 2004 BASEL MEETINGS; Essex Finance Centre Discussion Paper No. 04/13. Available at SSRN: https://ssrn.com/abstract=676002 or http://dx.doi.org/10.2139/ssrn.676002

Periklis Kougoulis

London Metropolitan University, Department of Economics, Finance and International Business ( email )

Economics Subject Group, LMBS
London EC2M 6SQ, EC2M 6SQ
United Kingdom

Jerry Coakley (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

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