A comprehensive long-term analysis of S&P 500 index additions and deletions

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

25 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)4920-4930
Journal / PublicationJournal of Banking and Finance
Volume37
Issue number12
Publication statusPublished - Dec 2013
Externally publishedYes

Abstract

We investigate the long-term effects of S&P 500 index additions and deletions on a sample of stocks from 1962 to 2003 and find a significant long-term price increase for both added and deleted stocks, with deleted stocks outperforming added stocks. The long-term price increase for added stocks can be attributed to increases in institutional ownership, liquidity, and analyst coverage, and a decrease in the shadow cost in the long-term. However, while deletion has no significant effect on analyst coverage and shadow cost, we find a rebound in the institutional ownership and liquidity of deleted stocks. The difference in the long-term price increase of added and deleted stocks can be explained by analyst coverage and operating performance. © 2013.

Research Area(s)

  • Information quality, Liquidity, Long-run performance, Operating performance, S&P 500 index revision