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

Nguyen, Ngoc and Gregoriou, Andros (2010) Stock liquidity and investment opportunities: new evidence from FTSE 100 index deletions. Journal of International Financial Markets, Institutions & Money, 20 (3). pp. 267-274. ISSN 1042-4431

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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.

Item Type:Article
Keywords (uncontrolled):Stock Liquidity, Investment Opportunities, Index Deletion, London Stock Exchange.
Research Areas:Business School > Accounting and Finance
ID Code:4542
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Deposited On:16 Mar 2010 16:37
Last Modified:15 Oct 2013 05:24

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