Document Type

Article

Publication Date

January 2013

Keywords

S&P 500 Discretionary Deletions, S&P 500 Changes, Excess Returns

Disciplines

Corporate Finance | Finance and Financial Management

Abstract

In this study we attempt to answer the question – does the start of pre-announcing of S&P 500 index changes in October 1989 have an effect on the trading pattern of added or deleted firms? We document that prior to October 1989 the excess returns of added or deleted firms follow a white noise process around the event, whereas after the start of pre-announcing the excess returns can be described as nonstationary. This indicates significant excess profits to be captured around the addition or deletion event after S&P started pre-announcing changes in October 1989 but not prior to that date.

Comments

Copyright © 2005-2014 The IBFR. All Rights Reserved. This article originally appeared in The International Journal of Business and Finance Research in Volume 7, Issue 5 and can be found online at this link.

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