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 journalJournal articlepeer-review

    35 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

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