<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>We examine how abnormal returns and abnormal return determinants change when a company is added to S&amp;P 500. Newly added companies experience a significant increase in abnormal returns around the announcement and addition dates. This increase is accompanied by an improvement in liquidity and a decrease in associated shadow cost. While before their addition, firm-specific abnormal returns can be explained by price impact, they are explained by changes in trading activity during the addition event. Additionally, companies with higher leverage ratios benefit more from index affiliation.</p>
</abstract>

We examine how abnormal returns and abnormal return determinants change when a company is added to S&P 500. Newly added companies experience a significant increase in abnormal returns around the announcement and addition dates. This increase is accompanied by an improvement in liquidity and a decrease in associated shadow cost. While before their addition, firm-specific abnormal returns can be explained by price impact, they are explained by changes in trading activity during the addition event. Additionally, companies with higher leverage ratios benefit more from index affiliation.

The Price Impact of S&amp;P 500 Affiliation

Studia Universitatis Babes-Bolyai Oeconomica

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"The Price Impact of S&P 500 Affiliation"}

We examine how abnormal returns and abnormal return determinants change when a company is added to S&P 500. Newly added companies experience a significant...

The Price Impact of S&P 500 Affiliation

Published Online: May 08, 2023

Page range: 42 - 61

DOI: https://doi.org/10.2478/subboec-2023-0003

Keywords
Index addition, index restructuring, stock addition, liquidity, abnormal returns

© 2023 Daria Gavrilova, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The Price Impact of S&P 500 Affiliation

Published Online: May 08, 2023

Page range: 42 - 61

DOI: https://doi.org/10.2478/subboec-2023-0003

KeywordsIndex addition, index restructuring, stock addition, liquidity, abnormal returns

© 2023 Daria Gavrilova, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Index addition, index restructuring, stock addition, liquidity, abnormal returns