Additions to and deletions from the S&P 500 index: A resolution to the asymmetric price response puzzle
Document Type
Article
Publication Date
2023
Department/School
Accounting and Finance
Publication Title
Journal of Banking & Finance
Abstract
We resolve the asymmetric price response puzzle for additions to and deletions from the S&P 500 documented in Chen, Noronha, and Singal (2004) by using a more appropriate methodology to measure abnormal returns and correctly adjusting for outliers. In contrast to their findings, our results show a permanent price response for both additions and deletions. We further distinguish between firms transferred into other S&P indices and true additions/deletions (firms not added from or placed into other S&P indices). We find a permanent price increase for true additions and a permanent decline in price for true deletions from the S&P 500.
Link to Published Version
Recommended Citation
Kumar, R., Lawrence, E. R., Prakash, A., & Rodriguez, Jr., I. M. (2023). Additions to and deletions from the S&P 500 index: A resolution to the asymmetric price response puzzle. Journal of Banking & Finance, 154, 106976. https://doi.org/10.1016/j.jbankfin.2023.106976
Comments
I. M. Rodriguez, Jr. is a faculty member in EMU's Department for Accounting, Finance, and Information Systems.