Stock liquidity and investment opportunities: new evidence from FTSE 100 index deletions

Article


Gregoriou, A. and Nguyen, N.D. 2010. Stock liquidity and investment opportunities: new evidence from FTSE 100 index deletions. Journal of International Financial Markets, Institutions and Money. 20 (3), pp. 267-274. https://doi.org/10.1016/j.intfin.2010.03.005
TypeArticle
TitleStock liquidity and investment opportunities: new evidence from FTSE 100 index deletions
AuthorsGregoriou, A. and Nguyen, N.D.
Abstract

This paper examines the relationship between stock liquidity and investment opportunities in a sample of firms experiencing a negative exogenous liquidity shock, captured by deletion from the FTSE 100 stock index. We find no statistical association between stock liquidity and investment opportunities. These findings are in sharp contrast to the positive relation between liquidity and investment opportunities reported in US equity markets. This unique result in the London Stock Exchange suggests that deletion from a major stock index does not influence corporate investment decisions because there is no significant change in the cost of capital.

KeywordsStock Liquidity; Investment Opportunities; Index Deletion; London Stock Exchange
PublisherElsevier
JournalJournal of International Financial Markets, Institutions and Money
ISSN1042-4431
Publication dates
Online23 Mar 2010
Print01 Jul 2010
Publication process dates
Deposited16 Mar 2010
Accepted15 Mar 2010
Output statusPublished
Web address (URL)http://www.sciencedirect.com/science/article/pii/S1042-4431(10)00008-9
Digital Object Identifier (DOI)https://doi.org/10.1016/j.intfin.2010.03.005
Scopus EIDS1042-4431(10)00008-9
Web of Science identifierWOS:000414283800004
LanguageEnglish
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