Comovement and FTSE 100 index changes
by Jerry Coakley; Periklis Kougoulis; John C. Nankervis
International Journal of Behavioural Accounting and Finance (IJBAF), Vol. 4, No. 2, 2014

Abstract: We employ the Barberis et al. (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 USA, Japan and Canada in supporting behavioural finance views of comovement.

Online publication date: Thu, 30-Apr-2015

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