S&P 500 Affiliation and Stock Price Informativeness
© 2019, © 2019 The Institute of Behavioral Finance. When firms are added to a stock index, more information should be discovered, traded on, and incorporated into their stock prices, making them more informative. We test this hypothesis using a large sample of additions to the S&P 500 index. Using two alternative statistical tests, we find that the stocks added experience more random, less predictable return and, thus, appear to be priced more efficiently information-wise. We further find concurrent increases in institutional ownership and investor awareness, which tend to contribute to the higher pricing efficiency, adding to the literature. These findings should be of interest to academics and practitioners.
Journal of Behavioral Finance
(2020). S&P 500 Affiliation and Stock Price Informativeness. Journal of Behavioral Finance, 21(3), 219-232.
Available at: https://aquila.usm.edu/fac_pubs/18256