A comprehensive long-term analysis of S&P 500 index additions and deletions

Kalok Chan, Hung Wan KOT*, Gordon Y N TANG

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)4920-4930
Number of pages11
JournalJournal of Banking and Finance
Volume37
Issue number12
DOIs
Publication statusPublished - Dec 2013

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Information quality
  • Liquidity
  • Long-run performance
  • Operating performance
  • S&P 500 index revision

Fingerprint

Dive into the research topics of 'A comprehensive long-term analysis of S&P 500 index additions and deletions'. Together they form a unique fingerprint.

Cite this