THE PRICE IMPACT OF S&P 500 AFFILIATION
THE PRICE IMPACT OF S&P 500 AFFILIATION
Author(s): Daria GavrilovaSubject(s): Energy and Environmental Studies, Financial Markets, Marketing / Advertising
Published by: Studia Universitatis Babes-Bolyai
Keywords: Index addition; index restructuring; stock addition; liquidity; abnormal returns;
Summary/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.
Journal: Studia Universitatis Babes Bolyai - Oeconomica
- Issue Year: 68/2023
- Issue No: 1
- Page Range: 42-61
- Page Count: 20
- Language: English