The price response to S & P 500 index additions and deletions: Evidence of asymmetry and a new explanation

    Authors

    H. H. Chen; G. Noronha;V. Singal

    Comments

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    Abbreviated Journal Title

    J. Financ.

    Keywords

    DEMAND CURVES; STANDARD-AND-POOR-500 LIST; INVESTOR RECOGNITION; MARKET-SEGMENTATION; ASSET PRICES; STOCKS; EQUILIBRIUM; VOLUME; SLOPE; GAME; Business, Finance

    Abstract

    We study the price effects of changes to the S&P 500 index and document an asymmetric price response: There is a permanent increase in the price of added firms but no permanent decline for deleted firms. These results are at odds with extant explanations of the effects of index changes that imply a symmetric price response to additions and deletions. A possible explanation for asymmetric price effects arises from the changes in investor awareness. Results from our empirical tests support the thesis that changes in investor awareness contribute to the asymmetric price effects of S&P 500 index additions and deletions.

    Journal Title

    Journal of Finance

    Volume

    59

    Issue/Number

    4

    Publication Date

    1-1-2004

    Document Type

    Article

    Language

    English

    First Page

    1901

    Last Page

    1929

    WOS Identifier

    WOS:000223171800015

    ISSN

    0022-1082

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