1. Negative returns on addition to the S&P 500 index and positive returns on deletion? New evidence on the attractiveness of S&P 500 versus S&P 400 indexes
- Author
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Vijh, Anand M. and Wang, Jiawei, Brooke
- Subjects
Standard & Poor's Corp. -- Services ,Financial research ,Securities trading ,Computer services industry -- Services ,Stock markets ,Stock price indexes ,Stock market ,Computer services industry ,Banking, finance and accounting industries ,Business - Abstract
In recent years, the majority of additions to and deletions from the S&P 500 index have been stocks that were previously or subsequently included in the S&P 400 index. The announcement returns of these changes have been the opposite of what has been documented for all S&P 500 additions and deletions in an extensive literature. During 20162020, such 'upward additions' to the S&P 500 index resulted in an average announcement excess return of -2.48% over a 3-day period, while 'downward deletions' to the S&P 400 index resulted in an excess return of +1.37%. We explain these new results by the increasing total institutional ownership of S&P 400 stocks. Our results thus show the increasing benefits of being included in the mid-cap S&P 400 index relative to being included in the large-cap S&P 500 index. KEYWORDS index rebalancing, institutional ownership, institutional trading, Russell index, S&P 500, 1 | INTRODUCTION Starting with Shleifer (1986), one of the most established event study results in finance has been that stocks earn positive returns on addition to the S&P 500 [...]
- Published
- 2022
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