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Is There an S&P 500 Index Effect?

Maria Kasch

University of Mannheim - Department of Finance

Asani Sarkar

Federal Reserve Bank of New York

November 5, 2012

1st Luxembourg Asset Management Summit 2012
9th European Winter Finance Summit (Skinance) 2013

We find that the firms included in the S&P 500 index are characterized by large increases in earnings, appreciation in market value and positive price momentum in the period preceding their index inclusion. This strong pre-inclusion performance predicts (1) the permanent increase of market value and (2) the change in return comovement, reflected in declines of size, value and momentum betas, following index inclusion. Non-event firms with similar performance experience similar appreciation in value and changes in comovement coincident with the event firms. Contrary to the consensus in the literature, our results indicate that – after accounting for the firms’ extraordinary pre-inclusion performance – index inclusion has no permanent effect on value and comovement.

Number of Pages in PDF File: 54

Keywords: S&P 500 inclusions, Pre-inclusion performance, Factor betas, Price and earnings momentum, Value effect

JEL Classification: G12, G15

working papers series

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Date posted: November 6, 2012 ; Last revised: January 9, 2013

Suggested Citation

Kasch, Maria and Sarkar, Asani, Is There an S&P 500 Index Effect? (November 5, 2012). 1st Luxembourg Asset Management Summit 2012. Available at SSRN: http://ssrn.com/abstract=2171235 or http://dx.doi.org/10.2139/ssrn.2171235

Contact Information

Maria Kasch (Contact Author)
University of Mannheim - Department of Finance ( email )
L5, 2, room 105
Mannheim, 68161
+49 621 181 1514 (Phone)
+49 621 181 1519 (Fax)
Asani Sarkar
Federal Reserve Bank of New York ( email )
Research Department
33 Liberty Street
New York, NY 10045
United States
212-720-8943 (Phone)
212-720-1582 (Fax)
HOME PAGE: http://www.newyorkfed.org/research/economists/sarkar/pub.html
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References:  35
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