New Evidence on Stock Price Effects Associated with Changes in the S&P 500 Index
Year: 1996
Type: preprint
Abstract: Since October 1989, Standard and Poor s has (when possible) announced changes in the composition of the S&P 500 index one week in advance. Because index funds hold S&P 500 stocks to minimize tracking error, index composition changes since this date provide an opportunity to examine the market reaction to an anticipated change in the demand for a stock. Using post-October-1989 data, we document significantly positive (negative) post-announcement abnormal returns that are only partially reversed following additions (deletions). These results indicate the existence of temporary price pressure and downward-sloping log-run demand curves for stocks and represent a violation of market efficiency.
Source: SSRN Electronic Journal
Authors: Anthony W. Lynch, Richard R. Mendenhall
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2147335100