DOI: 10.1016/j.jbankfin.2023.106976">
 

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.

Comments

I. M. Rodriguez, Jr. is a faculty member in EMU's Department for Accounting, Finance, and Information Systems.

Link to Published Version

DOI: 10.1016/j.jbankfin.2023.106976

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