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

Kalok Chan, Hung Wan Kot and Gordon Y.N. Tang

Journal of Banking & Finance, 2013, vol. 37, issue 12, 4920-4930

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.

Keywords: S&P 500 index revision; Long-run performance; Operating performance; Information quality; Liquidity (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:12:p:4920-4930

DOI: 10.1016/j.jbankfin.2013.08.027

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