IBEX 35 Inclusiones and Exclusiones

Abstract:     
S&P 500 Index changes are based on a variety of criteria secretly espoused by S&P. IBEX 35 Index changes are determined solely on stock liquidity and thus absent certification. In this setting we test whether demand curves for Spanish stocks slope downward. Consistent with liquidity hypotheses, we report a short-run symmetric stock price effect to IBEX 35 index additions and deletions. Asymmetric long-run returns to index changes can be explained by increased earnings expectations in companies removed from the index. After controlling for contemporaneous earnings our evidence is most consistent with short-run downward sloping demand curves for Spanish stocks.

Keywords: IBEX 35, Index, Composition

JEL Classifications: G10, G11

Working Paper Series