The Disappearing Index Effect

Robin Greenwood and Marco C. Sammon

No 30748, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The abnormal return associated with a stock being added to the S&P 500 has fallen from an average of 3.4% in the 1980s and 7.6% in the 1990s to 0.8% over the past decade. This has occurred despite a significant increase in the percentage of stock market assets linked to the index. A similar pattern has occurred for index deletions, with large negative abnormal returns on average during the 1980s and 1990s, but only -0.6% between 2010 and 2020. We investigate potential drivers of this surprising phenomenon and discuss the implications for market efficiency.

JEL-codes: G1 G10 G14 G4 (search for similar items in EconPapers)
Date: 2022-12
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