Department of Finance & Decision Sciences
A comprehensive long-term analysis of S&P 500 index additions and deletions
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. © 2013.
Information quality, Liquidity, Long-run performance, Operating performance, S&P 500 index revision
Source Publication Title
Journal of Banking and Finance
Chan, Kalok, Hung Wan Kot, and Gordon Y.N. Tang. "A comprehensive long-term analysis of S&P 500 index additions and deletions." Journal of Banking and Finance 37.12 (2013): 4920-4930.