The Price Impact of S&P 500 Affiliation

Gavrilova Daria ()
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Gavrilova Daria: Babeș-Bolyai University, Romania

Studia Universitatis Babeș-Bolyai Oeconomica, 2023, vol. 68, issue 1, 42-61

Abstract: We examine how abnormal returns and abnormal return determinants change when a company is added to S&P 500. Newly added companies experience a significant increase in abnormal returns around the announcement and addition dates. This increase is accompanied by an improvement in liquidity and a decrease in associated shadow cost. While before their addition, firm-specific abnormal returns can be explained by price impact, they are explained by changes in trading activity during the addition event. Additionally, companies with higher leverage ratios benefit more from index affiliation.

Keywords: Index addition; index restructuring; stock addition; liquidity; abnormal returns (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:subboe:v:68:y:2023:i:1:p:42-61:n:4

DOI: 10.2478/subboec-2023-0003

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