Department of Finance and 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
Link to Publisher's Edition
Chan, K., Kot, H., & Tang, G. (2013). A comprehensive long-term analysis of S&P 500 index additions and deletions. Journal of Banking and Finance, 37 (12), 4920-4930. https://doi.org/10.1016/j.jbankfin.2013.08.027