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A change of focus: Stock market reclassification in the UK

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  • Bryan Mase

Abstract

This paper examines the impact of a change of focus by a firm, as signified by a firm's stock market reclassification. It distinguishes between a firm's sector reclassification motivated by information specific to that firm and one that results from the redefinition and reorganisation of a sector. The direction of the price effects following reclassification depends significantly upon this distinction. Furthermore, a stock's return comovement with the FTSE All-Share Index is affected by its reclassification into a new sector, consistent with the allocation of stocks into categories by investors. Reclassification can induce common factors in the returns to stocks in an index without there being any change in these stocks' fundamental cash flows.

Suggested Citation

  • Bryan Mase, 2008. "A change of focus: Stock market reclassification in the UK," The European Journal of Finance, Taylor & Francis Journals, vol. 14(3), pages 179-193.
    • Handle: RePEc:taf:eurjfi:v:14:y:2008:i:3:p:179-193
    DOI: 10.1080/13518470801892285
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    Cited by:

    1. Helen X. H. Bao & Adam Brady & Ziyou Wang, 2020. "Pricing Efficiency and Bounded Rationality: Evidence Based on the Responses Surrounding GICS Real Estate Category Creation," International Real Estate Review, Global Social Science Institute, vol. 23(1), pages 663-689.
    2. Helen X. H. Bao & Adam Brady & Ziyou Wang, 2020. "Pricing Efficiency and Bounded Rationality: Evidence Based on the Responses Surrounding GICS Real Estate Category Creation," International Real Estate Review, Global Social Science Institute, vol. 23(1), pages 37-63.
    3. Angélica María Sánchez-Riofrío & Luis Ángel Guerras-Martín & Francisco Javier Forcadell, 2015. "Business portfolio restructuring: a comprehensive bibliometric review," Scientometrics, Springer;Akadémiai Kiadó, vol. 102(3), pages 1921-1950, March.
    4. Zuriadah Ismail & Rohaila Yusof & Hazianti Abdul Halim & Anis Suriati Ahmad, 2019. "Stock Returns Volatility around Sector Redefinitions: An Event Case Study of Malaysia Listed Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(3), pages 300-304, July.

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