The (Mis)Uses of the S&P 500

63 Pages Posted: 29 Jun 2018 Last revised: 6 Sep 2019

See all articles by Adriana Robertson

Adriana Robertson

University of Toronto - Faculty of Law


The S&P 500 is widely used as (i) a means of directing investor capital through “passive” investing, (ii) a benchmark for evaluating the performance of investment portfolios and managers, and (iii) a means of evaluating the performance of firms and corporate managers. In this Article, I show that, far from being neutral or constant, the index represents a substantial amount of discretionary decision-making, and is simply one particular large cap index whose composition changes substantially over time. I quantify the magnitude of this discretion and the implications of changes in composition and show that they are large. Failing to recognize these features can lead to substantial misuses of the index in all three contexts.

Keywords: stock market indices, S&P 500, securities, mutual funds, passive investing, active investing

JEL Classification: K22, G11,G29

Suggested Citation

Robertson, Adriana, The (Mis)Uses of the S&P 500. Available at SSRN: or

Adriana Robertson (Contact Author)

University of Toronto - Faculty of Law ( email )

78 Queen's Park
Toronto, Ontario M5S 2C5

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