S&P 500 Index Additions and Earnings Expectations

Diane K. Denis, John J. McConnell, Alexei Ovtchinnikov and Yun Yu

Journal of Finance, 2003, vol. 58, issue 5, 1821-1840

Abstract: Stock price increases associated with addition to the S&P 500 Index have been interpreted as evidence that demand curves for stocks slope downward. A key premise underlying this interpretation is that Index inclusion provides no new information about companies' future prospects. We examine this premise by analyzing analysts' earnings per share (eps) forecasts around Index inclusion and by comparing postinclusion realized earnings to preinclusion forecasts. Relative to benchmark companies, companies newly added to the Index experience significant increases in eps forecasts and significant improvements in realized earnings. These results indicate that S&P Index inclusion is not an information‐free event.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (105)

Downloads: (external link)
https://doi.org/10.1111/1540-6261.00589

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:58:y:2003:i:5:p:1821-1840

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().