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The Price Impact of S&P 500 Affiliation

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  • Gavrilova Daria

    (Babeș-Bolyai University, Romania)

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.

Suggested Citation

  • Gavrilova Daria, 2023. "The Price Impact of S&P 500 Affiliation," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 68(1), pages 42-61, April.
    • Handle: RePEc:vrs:subboe:v:68:y:2023:i:1:p:42-61:n:4
    DOI: 10.2478/subboec-2023-0003
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    References listed on IDEAS

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    More about this item

    Keywords

    Index addition; index restructuring; stock addition; liquidity; abnormal returns;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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