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Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27137
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| Title: | New Evidence on Stock Price Effects Associated with Charges in the
S&P 500 Index |
| Authors: | Lynch, Anthony W.
Mendenhall, Richard R. |
| Keywords: | S&P 500 Changes
Stock Demand Curves
Market Efficiency
Volume Price Relationships |
| Issue Date: | 9-Jun-1996 |
| Series/Report no.: | FIN-95-028 |
| Abstract: | Since October 1989, Standard and Poor’s has (when possible)
announced changes in the composition of the S&P 500 index one week
in advance. Because index funds hold S&P 500 stocks to minimize
tracking error, index composition changes since this date provide an
opportunity to examine the market reaction to an anticipated change in
the demand for a stock. Using post-October-1989 data, we document
significantly positive (negative) post-announcement abnormal returns
that are only partially reversed following additions (deletions). These
results indicate the existence of temporary price pressure and
downward-sloping log-run demand curves for stocks and represent a
violation of market efficiency. |
| URI: | http://hdl.handle.net/2451/27137 |
| Appears in Collections: | Finance Working Papers
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