We study the price effects of firms added to and deleted from the Samp;P 500 index and document an asymmetric price response: there is a permanent increase in the price of added firms but no similar decline for deleted firms. These results are at odds with extant explanations of the effects of...

We study the price effects of firms added to and deleted from the Samp;P 500 index and document an asymmetric price response: there is a permanent increase in the price of added firms but no similar decline for deleted firms. These results are at odds with extant explanations of the effects of...

Recent evidence of excessive comovement among stocks following index additions (Barberis, Shleifer, and Wurgler, 2005) and stock splits (Green and Hwang, 2009) challenges traditional finance theory. Based on a simple model, we show that the bivariate regressions relied upon in the literature...

Recent evidence of excessive comovement among stocks following index additions (Barberis, Shleifer, and Wurgler, 2005) and stock splits (Green and Hwang, 2009) challenges traditional finance theory. Based on a simple model, we show that the bivariate regressions relied upon in the literature...

We find that, due to arbitrage around index changes, investors in Samp;P 500-linked funds lose between 0.03% and 0.12% annually, while investors in Russell 2000-linked funds lose between 1.30% and 1.84%. In dollar terms, the losses range from $3.75 billion to $6 billion a year for the two...