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 New Evidence on Stock Price Effects Associated with Changes in the S P 500 Index written by Anthony W. Lynch and published by . This book was released on 1995 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The S P 500 Index Effect in Continuous Time written by Konstantina Kappou and published by . This book was released on 2007 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The advent of index tracking early in the 1970s and the continuous growth of assets tied to the Samp;P 500 index have enforced perceptions of the importance of becoming an index-member, due to increased demand by index fund participants for the stocks involved in index composition changes. This study focuses on Samp;P 500 inclusions and examines the impact of potential overnight price adjustment after the announcement of an Samp;P 500 index change. We find evidence of a significant overnight price change that diminishes the profits available to speculators although there are still profits available from the first day after announcement until a few days after the actual event. More importantly observing the tick-by-tick stock price performance of the key days of the event window for the first time, we find evidence of consistent trading patterns during trading hours over inclusion event. A separate analysis of two different sub-periods as well as of NASDAQ and NYSE listed stocks allows for a detailed examination of the price and volume effect in continuous time.
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 Investor Awareness and Market Segmentation written by Honghui Chen and published by . This book was released on 2002 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several studies have found that stock price changes resulting from firms added to the Samp;P 500 index can be best exp lained by a downward sloping demand curve. In this paper, we study price effects around both additions and deletions and find that the price effect of index changes is consistent with Merton's (1987) investor-awareness and market segmentation hypothesis. We find that the reduction in shadow cost of incomplete diversification that follows additions is correlated with abnormal returns accruing to the added stocks. We also find that the asymmetric price effects of additions and deletions that have not been explained by empirical studies thus far are consistent with market segmentation.
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 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 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 Price Effects Associated with Changes in the Standard Poor s 500 Index Composition written by Alexander C. Peterson and published by . This book was released on 2004 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Demand on Stock Prices written by Ph.D. Biktimirov (CFA, Ernest N.) and published by . This book was released on 2009 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the effect of demand on stock prices by analyzing the transition of the Samp;P 500 index from market capitalization to free float weighting, which occurred in 2005. I find that a decrease in demand produced a permanent stock price decline, which was accompanied by significant abnormal trading volume. The results provide support for the downward-sloping demand curve hypothesis.
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Download or read book Changes in the Nikkei 500 written by Shinhua Liu and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the price and trading volume effects of changes in the Nikkei 500. On average, price increases (decreases) significantly for stocks added (deleted) with no post-event reversal. Trading volume, on average, increases significantly for both additions and deletions in the short run. Furthermore, long-term trading volume drops (rises) significantly for stocks added (deleted), suggesting gradual index-linked trading behavior. We interpret these evidences as supportive of only the hypothesis of downward-sloping demand curves for stocks. Finally, as expected, changes in the Nikkei 500 induce considerably smaller (in magnitude) price changes than changes in the Samp;P 500.
Download or read book Price Response to Factor Index Additions and Deletions written by Joop Huij and published by . This book was released on 2018 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abnormal price reaction around S&P 500 index changes has been considered as strong evidence that long term demand for stocks is downward sloping. This notion, however, has recently lost popularity due to the evidence that new additions are accompanied with a contemporaneous change in future earnings expectations. In this study we show that factor index rebalancing is a true information free event. The cumulative abnormal return from announcement to effective day is 1.07% for new additions and -0.91% for new deletions and around two-thirds of this effect is permanent. We find a direct relationship between the magnitude of abnormal returns and the abnormal volume coming from index funds. The documented effect results in a direct loss to index fund investors of 16.5 bps per annum.
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 The Mysterious Growing Value of S P 500 Membership written by Randall Morck and published by . This book was released on 2001 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: The efficient markets hypothesis implies that passive indexing should generate as high a return as active fund management. Indexing has been a very successful strategy. We document a large value premium in the average q ratios of firms in the S & P 500 index relative to the q ratios of other similar firms that appears in the mid 1980s and grows in step with the growth of indexing. Passive investment strategies that require the purchase of the particular 500 stocks in this index increase demand for those stocks and so push up their prices. In short, indexing induces downward sloping demand curves for stocks in the index. For reasons that are not fully clear, arbitrageurs apparently do not correct this overvaluation.
Download or read book The S P 500 Effect written by Daniel Cooper and published by . This book was released on 2002 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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:
