35 Pages Posted: 3 Mar 2006
Firms added to (deleted from) the S&P 600 index experience a significant price increase(decrease) at announcement. Firms that newly enter (exit) the S&P universe experience a larger price increase (decrease) than firms that move between S&P indexes. Trading volumes are higher after the announcement and institutional ownership increases (decreases) following index additions (deletions). However, the price and volume effects are temporary and are fully reversed within 60 days, in contrast to the permanent effects reported for S&P 500 changes. Our results support the temporary price pressure hypothesis and are similar to results reported for Russell 2000 index changes.
Keywords: S&P SmallCap 600 index, Standard and Poor's 600, stock-market index changes, index reconstitution, price pressure, institutional ownership
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Shankar, S. Gowri and Miller, James M., Market Reaction to Changes in the S&P SmallCap 600 Index . The Financial Review, Vol. 41, No. 3, August 2006. Available at SSRN: https://ssrn.com/abstract=886141