What Drives the S&P 500 Inclusion Effect? An Analytical Survey |
| |
| Authors: | William B. Elliott Bonnie F. Van Ness Mark D. Walker Richard S. Wan |
| |
| Affiliation: | William B. Elliott is an assistant professor of finance at Oklahoma State University in Stillwater, OK. Bonnie F. Van Ness is an associate professor of finance at the University of Mississippi in University, MS. Mark D. Walker is an assistant professor of finance at North Carolina State University in Raleigh, NC. Richard S. Warr is an associate professor of finance at North Carolina State University in Raleigh, NC |
| |
| Abstract: | We present an analytical survey of the explanations—price pressure, downward-sloping demand curves, improved liquidity, improved operating performance, and increased investor awareness—for the increase in stock value associated with inclusion in the S&P 500 Index. We find that increased investor awareness is the primary factor behind the cross-section of abnormal announcement returns. We also find some evidence of temporary price pressure around the inclusion date. We find no evidence that long-run downward-sloping demand curves for stocks, anticipated improvements in operating performance, or increased liquidity are related to the cross-section of announcement or inclusion returns. |
| |
| Keywords: | |
|
|
