Download or read book Negative Returns on Addition to S P 500 Index and Positive Returns on Deletion New Evidence on Attractiveness of S P 500 Vs S P 400 Indexes written by Anand M. Vijh and published by . This book was released on 2020 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, the majority of additions to and deletions from the S&P 500 index have been stocks that were previously or subsequently included in the S&P 400 index. The announcement returns of these changes have been the opposite of what has been documented for all S&P 500 additions and deletions in an extensive literature. During 2016-2019, such 'upward additions' to the S&P 500 index resulted in an average announcement excess return of -2.31% over a three-day period while 'downward deletions' resulted in an excess return of +1.21%. We explain these new results by the increasing ownership of S&P 400 stocks by institutional investors, the majority of whom are active fund managers. Our results thus show the increasing benefits of being included in the mid-cap S&P 400 index relative to being included in the large-cap S&P 500 index.

Download or read book New Evidence from S P 500 Index Deletions written by Rashiqa Kamal and published by . This book was released on 2014 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kamal, Lawrence, McCabe, and Prakash (2012) argue that information asymmetry exists in the financial markets and additions to S&P 500 Index convey new information about the added firms to the uninformed investors. They further argue that because of important changes and regulations in the financial markets, like, Regulation Fair Disclosure, Sarbanes-Oxley Act, and Decimalization of the exchanges, in or after the year 2000, information asymmetry has decreased. In support of their arguments, they find that for additions, the positive abnormal returns on announcement day have decreased, and added stocks' liquidity changes have become marginal in the post-2000 period. We extend their work and for a sample of deletions between October 1989 and December 2011, we find that the negative abnormal returns on the announcement day are not significantly different in the post-2000 period, but the negative returns are reversed earlier in the post-2000 period. Contrary to our expectation, liquidity changes after deletion are significant in the post-2000 period. However, when we divide our sample into optioned versus nonoptioned stocks and control for other factors that affect liquidity, we find that liquidity changes after deletion are insignificant in the post-2000 period.

Download or read book New Evidence on Stock Price Effects Associated with Charges in the S P 500 Index written by Anthony W. Lynch and published by . This book was released on 2008 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since October 1989, Standard and Poor s has (when possible) announced changes in the composition of the Samp;P 500 index one week in advance. Because index funds hold Samp;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.

Download or read book The Price Response to S P 500 Index Additions and Deletions written by Honghui Chen and published by . This book was released on 2003 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the price effects of firms added to and deleted from the Samp;P 500 index and document an asymmetric price response: there is a permanent increase in the price of added firms but no similar decline for deleted firms. These results are at odds with extant explanations of the effects of Samp;P 500 index changes which imply a symmetric price response to additions and deletions. A possible explanation for asymmetric price effects arises from changes in investor awareness. Results from our empirical tests support the thesis that changes in investor awareness contribute to the asymmetric price effects of Samp;P 500 index additions and deletions.

Download or read book On Replicating the S P 500 Index written by Marshall E. Blume and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: To minimize tracking error, Samp;P 500 index funds often follow inflexible, nearly exact replication strategies. This inflexibility causes stocks with relatively low floating supply to experience abnormally high negative or positive returns upon addition or deletion on average. Moreover, the alternative of trading at the open following the announcement of a change, rather than when the change occurs, results in 25.9 basis points more return per year with virtually no incremental variance. If investment principals knew in advance of these additional returns, they may nonetheless have rationally chosen to forgo such added returns to better monitor their agents. The early-trading strategy has much higher tracking errors than the 2.7 basis-point average of the largest indexer.

Download or read book A REVIEW OF TYPICAL FIRM DELETION FROM THE S P 500 written by Rena Li and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Investors and firms are always trying to predict the future, but what is certain is change. In this paper, I investigate S&P 500 changes to further research on the supposed presence of an asymmetric price response between index additions and deletions. By replicating the original study which asserted the existence of asymmetry, I place a particular focus on the deletions due to the lack of agreement on the subject and report the cumulative abnormal return medians of deleted firms. Medians contribute typicality, while means fall susceptible to outliers and as a result, skewness. By providing the median cumulative abnormal returns of deleted S&P 500 firms, future S&P member firms can understand and predict what is standard or ordinary upon index deletion. Unfortunately, the answer of typical deletion is bleak with most deleted firms declining in share price initially and even 60 trading days out. The medians do not lie.

Download or read book A Comprehensive Long Term Analysis of S P 500 Index Additions and Deletions written by Kalok Chan and published by . This book was released on 2015 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Market Capitalization Changes For S P 500 Inclusions And Exclusions written by Colin Tissen and published by GRIN Verlag. This book was released on 2015-06-19 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (postgraduate) from the year 2015 in the subject Business economics - Investment and Finance, grade: 9.0/10, Maastricht University, language: English, abstract: Previous research has already proven that firms which get included in or excluded from the S&P 500 index experience stock price changes that ultimately result in market capitalization changes. The causes of these changes has extensively been examined, but a consensus on the true cause has not yet been reached. In this paper the market capitalization effect is examined by making a distinction between the reasons for inclusions and exclusions. It is argued that expected events, like bankruptcy and index-downgrading, have lower price effects than unexpected events, which include mergers and acquisitions. By usage of a regression analysis it is concluded that there is no difference in price effects between the individual reasons for inclusions and exclusions. However, when the reasons are grouped into unexpected and expected events there is a significant effect for the inclusions. Firms which expectedly enter the index experience lower market capitalizations changes than firms which unexpectedly entered the index. This effect could not be proved for exclusions.

Download or read book Analysis of the Effects of Pre Announcement of S P 500 Index Changes written by Stoyu I. Ivanov and published by . This book was released on 2013 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study we attempt to answer the question - does the start of pre-announcing of S&P 500 index changes in October 1989 have an effect on the trading pattern of added or deleted firms? We document that prior to October 1989 the excess returns of added or deleted firms follow a white noise process around the event, whereas after the start of pre-announcing the excess returns can be described as nonstationary. This indicates significant excess profits to be captured around the addition or deletion event after S&P started pre-announcing changes in October 1989 but not prior to that date.

Download or read book Do Index Effects Reflect Idiosyncratic or Industry Effects A Re Examination of the Winners and Losers of S P 500 Index Addition written by Isaac K. Otchere and published by . This book was released on 2007 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new findings concerning additions to the Samp;P 500 Index. We present the first evidence of industry effects that occur when stocks are added to the Samp;P 500 Index. With over a trillion dollars in index funds wealth tied to the Samp;P 500 Index, index additions exert price pressures on not only the firms that are added to the index and but the incumbent industry counterparts as well. We find that the share price of an added firm's industry counterparts increase in the announcement date and decrease on the effective date. We provide evidence that portfolio rebalancing helps explain the effective date abnormal returns documented for the incumbent industry counterparts. In addition, we show that the likelihood of a company being added to the Samp;P 500 Index is higher in industries with strong innovative activity, making revisions to the Index a vehicle for incorporating the value of such activity. Overall, our results suggest that Samp;P 500 Index composition changes are not information-free events.

Download or read book Extended Stock Returns in Response to S P 500 Index Changes written by Nimesh Patel and published by . This book was released on 2016 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our paper investigates extended abnormal returns for S&P 500 index changes in a comprehensive 1979-2015 sample. The literature's depiction of longer window returns lacked both appropriate nuance and cross-sectional analysis. Solid evidence for reversion appears in the 2000s. It suggests that stocks no longer experience permanent shifts in investor demand when they are added to or removed from the S&P 500.

Download or read book REAL EFFECTS OF S P 500 INDEX written by Yong Wei and published by Open Dissertation Press. This book was released on 2017-01-24 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "The Real Effects of S&P 500 Index Additions: Evidence From Corporate Investment" by Yong, Wei, 卫勇, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b4490681 Subjects: Stocks - Prices - Mathematical models Corporations - Finance - Mathematical models

Download or read book S P 500 Index Changes and Investor Awareness written by Honghui Chen and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We find that, on average, firms added to the Samp;P 500 index experience a permanent price increase, while those deleted from it suffer only a temporary price decline. Existing theories, such as a downward sloping demand curve, liquidity, and information, fail to explain the asymmetric response. We propose a new explanation for the observed price patterns: changes in investor awareness. Investors become more aware of a stock upon its addition to the Samp;P 500 index but do not become similarly unaware of a stock following its deletion. This results in a significant price increase after an addition but not an equivalent decline after a deletion. Consistent with our hypothesis, we find that Merton's (1987) measure of awareness improves after an addition but remains essentially unchanged after a deletion. The price reaction is related to changes in the measure of awareness.From a practical standpoint, our results suggest that index fund managers who are not constrained by tracking error minimization are better off not trading on the effective date. Rather, they may be able to benefit their shareholders by executing purchases of additions upon announcement, but waiting to sell deleted firms until well after the effective date.

Download or read book The Causal Relationship between the S P 500 and the VIX Index written by Florian Auinger and published by Springer. This book was released on 2015-02-13 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Florian Auinger highlights the core weaknesses and sources of criticism regarding the VIX Index as an indicator for the future development of financial market volatility. Furthermore, it is proven that there is no statistically significant causal relationship between the VIX and the S&P 500. As a consequence, the forecastability is not given in both directions. Obviously, there must be at least one additional variable that has a strong influence on market volatility such as emotions which, according to financial market experts, are considered to play a more and more important role in investment decisions.

Download or read book Closing the Question on the Continuation of Turn of the month Effects written by Edwin D. Maberly and published by . This book was released on 2000 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Gambling on the S P 500 s Gold Seal written by Chris Brooks and published by . This book was released on 2007 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the abnormal returns, trading activity and long term performance of stocks that were added to the Samp;P 500 Index during the period 1990 to 2002. By using a three-factor pricing model that allows for firm size and value characteristics as well as market risk, we are able to shed new light on the widely observed index effect. We argue that for the years 1990-1997 in particular, firm size mattered in the long-run and firm size effects cannot be captured by a single factor model for abnormal returns. We also find a transitory increase in trading volume between the announcement and a few days after the effective date. The seal of Samp;P 500 Index membership has very long term effects and inclusion is not an information-free event.

Download or read book The Long Term Price Effect of S P 500 Index Addition and Earnings Quality written by Petya Platikanova and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A positive price response ...