TY - JOUR
T1 - A comprehensive long-term analysis of S&P 500 index additions and deletions
AU - Chan, Kalok
AU - KOT, Hung Wan
AU - TANG, Gordon Y N
N1 - Funding Information:
We thank an anonymous referee, Honghui Chen, Li Ge, and participants of a seminar at the Shanghai University of Finance and Economics and the AsianFA International Conference at Taipei for their helpful comments, and Harry Leung for his excellent research assistance. An earlier version of this paper was circulated under the title “Stocks added to or deleted from the S&P 500 index: A comprehensive long-term analysis.” We acknowledge a faculty research grant from the Hong Kong Baptist University. Any errors are our own.
PY - 2013/12
Y1 - 2013/12
N2 - 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.
AB - 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.
KW - Information quality
KW - Liquidity
KW - Long-run performance
KW - Operating performance
KW - S&P 500 index revision
UR - http://www.scopus.com/inward/record.url?scp=84884785979&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2013.08.027
DO - 10.1016/j.jbankfin.2013.08.027
M3 - Article
AN - SCOPUS:84884785979
VL - 37
SP - 4920
EP - 4930
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 12
ER -