New Evidence On Stock Price Effects Associated With Changes In The S P 500 Index
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New Evidence On Stock Price Effects Associated With Charges In The S P 500 Index
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Author : Anthony W. Lynch
language : en
Publisher:
Release Date : 2008
New Evidence On Stock Price Effects Associated With Charges In The S P 500 Index written by Anthony W. Lynch and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Since October 1989, Standard and Poor s has (when possible) announced changes in the composition of the Samp;P 500 index one week in advance. Because index funds hold Samp;P 500 stocks to minimize tracking error, index composition changes since this date provide an opportunity to examine the market reaction to an anticipated change in the demand for a stock. Using post-October-1989 data, we document significantly positive (negative) post-announcement abnormal returns that are only partially reversed following additions (deletions). These results indicate the existence of temporary price pressure and downward-sloping log-run demand curves for stocks and represent a violation of market efficiency.
New Evidence On Stock Price Effects Associated With Changes In The S P 500 Index
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Author : Anthony W. Lynch
language : en
Publisher:
Release Date : 1995
New Evidence On Stock Price Effects Associated With Changes In The S P 500 Index written by Anthony W. Lynch and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Stocks categories.
Investor Awareness And Market Segmentation
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Author : Honghui Chen
language : en
Publisher:
Release Date : 2002
Investor Awareness And Market Segmentation written by Honghui Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
Several studies have found that stock price changes resulting from firms added to the Samp;P 500 index can be best exp lained by a downward sloping demand curve. In this paper, we study price effects around both additions and deletions and find that the price effect of index changes is consistent with Merton's (1987) investor-awareness and market segmentation hypothesis. We find that the reduction in shadow cost of incomplete diversification that follows additions is correlated with abnormal returns accruing to the added stocks. We also find that the asymmetric price effects of additions and deletions that have not been explained by empirical studies thus far are consistent with market segmentation.
Do Index Effects Reflect Idiosyncratic Or Industry Effects A Re Examination Of The Winners And Losers Of S P 500 Index Addition
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Author : Isaac K. Otchere
language : en
Publisher:
Release Date : 2007
Do Index Effects Reflect Idiosyncratic Or Industry Effects A Re Examination Of The Winners And Losers Of S P 500 Index Addition written by Isaac K. Otchere and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
This paper provides new findings concerning additions to the Samp;P 500 Index. We present the first evidence of industry effects that occur when stocks are added to the Samp;P 500 Index. With over a trillion dollars in index funds wealth tied to the Samp;P 500 Index, index additions exert price pressures on not only the firms that are added to the index and but the incumbent industry counterparts as well. We find that the share price of an added firm's industry counterparts increase in the announcement date and decrease on the effective date. We provide evidence that portfolio rebalancing helps explain the effective date abnormal returns documented for the incumbent industry counterparts. In addition, we show that the likelihood of a company being added to the Samp;P 500 Index is higher in industries with strong innovative activity, making revisions to the Index a vehicle for incorporating the value of such activity. Overall, our results suggest that Samp;P 500 Index composition changes are not information-free events.
The Price Response To S P 500 Index Additions And Deletions
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Author : Honghui Chen
language : en
Publisher:
Release Date : 2003
The Price Response To S P 500 Index Additions And Deletions written by Honghui Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
We study the price effects of firms added to and deleted from the Samp;P 500 index and document an asymmetric price response: there is a permanent increase in the price of added firms but no similar decline for deleted firms. These results are at odds with extant explanations of the effects of Samp;P 500 index changes which imply a symmetric price response to additions and deletions. A possible explanation for asymmetric price effects arises from changes in investor awareness. Results from our empirical tests support the thesis that changes in investor awareness contribute to the asymmetric price effects of Samp;P 500 index additions and deletions.
The S P 500 Index Effect In Continuous Time
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Author : Konstantina Kappou
language : en
Publisher:
Release Date : 2007
The S P 500 Index Effect In Continuous Time written by Konstantina Kappou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
The advent of index tracking early in the 1970s and the continuous growth of assets tied to the Samp;P 500 index have enforced perceptions of the importance of becoming an index-member, due to increased demand by index fund participants for the stocks involved in index composition changes. This study focuses on Samp;P 500 inclusions and examines the impact of potential overnight price adjustment after the announcement of an Samp;P 500 index change. We find evidence of a significant overnight price change that diminishes the profits available to speculators although there are still profits available from the first day after announcement until a few days after the actual event. More importantly observing the tick-by-tick stock price performance of the key days of the event window for the first time, we find evidence of consistent trading patterns during trading hours over inclusion event. A separate analysis of two different sub-periods as well as of NASDAQ and NYSE listed stocks allows for a detailed examination of the price and volume effect in continuous time.
Market Capitalization Changes For S P 500 Inclusions And Exclusions
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Author : Colin Tissen
language : de
Publisher:
Release Date : 2015-07-09
Market Capitalization Changes For S P 500 Inclusions And Exclusions written by Colin Tissen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-07-09 with categories.
Research Paper from the year 2015 in the subject Business economics - Investment and Finance, grade: 9.0/10, Maastricht University, language: English, abstract: Previous research has already proven that firms which get included in or excluded from the S&P 500 index experience stock price changes that ultimately result in market capitalization changes. The causes of these changes has extensively been examined, but a consensus on the true cause has not yet been reached. In this paper the market capitalization effect is examined by making a distinction between the reasons for inclusions and exclusions. It is argued that expected events, like bankruptcy and index-downgrading, have lower price effects than unexpected events, which include mergers and acquisitions. By usage of a regression analysis it is concluded that there is no difference in price effects between the individual reasons for inclusions and exclusions. However, when the reasons are grouped into unexpected and expected events there is a significant effect for the inclusions. Firms which expectedly enter the index experience lower market capitalizations changes than firms which unexpectedly entered the index. This effect could not be proved for exclusions.
Price Response To Factor Index Additions And Deletions
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Author : Joop Huij
language : en
Publisher:
Release Date : 2018
Price Response To Factor Index Additions And Deletions written by Joop Huij and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Abnormal price reaction around S&P 500 index changes has been considered as strong evidence that long term demand for stocks is downward sloping. This notion, however, has recently lost popularity due to the evidence that new additions are accompanied with a contemporaneous change in future earnings expectations. In this study we show that factor index rebalancing is a true information free event. The cumulative abnormal return from announcement to effective day is 1.07% for new additions and -0.91% for new deletions and around two-thirds of this effect is permanent. We find a direct relationship between the magnitude of abnormal returns and the abnormal volume coming from index funds. The documented effect results in a direct loss to index fund investors of 16.5 bps per annum.
The Effect Of Demand On Stock Prices
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Author : Ph.D. Biktimirov (CFA, Ernest N.)
language : en
Publisher:
Release Date : 2009
The Effect Of Demand On Stock Prices written by Ph.D. Biktimirov (CFA, Ernest N.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
I examine the effect of demand on stock prices by analyzing the transition of the Samp;P 500 index from market capitalization to free float weighting, which occurred in 2005. I find that a decrease in demand produced a permanent stock price decline, which was accompanied by significant abnormal trading volume. The results provide support for the downward-sloping demand curve hypothesis.
New Evidence From S P 500 Index Deletions
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Author : Rashiqa Kamal
language : en
Publisher:
Release Date : 2014
New Evidence From S P 500 Index Deletions written by Rashiqa Kamal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Kamal, Lawrence, McCabe, and Prakash (2012) argue that information asymmetry exists in the financial markets and additions to S&P 500 Index convey new information about the added firms to the uninformed investors. They further argue that because of important changes and regulations in the financial markets, like, Regulation Fair Disclosure, Sarbanes-Oxley Act, and Decimalization of the exchanges, in or after the year 2000, information asymmetry has decreased. In support of their arguments, they find that for additions, the positive abnormal returns on announcement day have decreased, and added stocks' liquidity changes have become marginal in the post-2000 period. We extend their work and for a sample of deletions between October 1989 and December 2011, we find that the negative abnormal returns on the announcement day are not significantly different in the post-2000 period, but the negative returns are reversed earlier in the post-2000 period. Contrary to our expectation, liquidity changes after deletion are significant in the post-2000 period. However, when we divide our sample into optioned versus nonoptioned stocks and control for other factors that affect liquidity, we find that liquidity changes after deletion are insignificant in the post-2000 period.