S&P 500 inclusions and stock supply

Jan Schnitzler

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

I provide new evidence of the S&P500 inclusion effect that highlights the importance of stock supply. If excess demand from S&P500-linked capital drives the inclusion effect, it should depend as well on the effective supply of a stock. Standard & Poor's index methodology gives two distinct features of a stock's ownership composition a supply interpretation. Both measures significantly predict the cross-sectional size of inclusion returns. Switching to free-floating index weights in 2005 enables a quasi-natural experiment to one proxy and a placebo test to the other. Finally, evidence from the most recent decade indicates that any persistence in the inclusion effect has disappeared.

Original languageEnglish
Pages (from-to)341-356
Number of pages16
JournalJournal of Empirical Finance
Volume48
DOIs
Publication statusPublished - Sep 2018

Keywords

  • Arbitrage capital
  • Control ownership
  • Downward-sloping demand for stocks
  • Free-float index weight adjustment
  • Price pressure
  • S&P 500 additions

Fingerprint Dive into the research topics of 'S&P 500 inclusions and stock supply'. Together they form a unique fingerprint.

Cite this