We study the price effects of changes to the S&P 500 index and document an asymmetric price response: There is a permanent increase in the price of added firms but no permanent decline for deleted firms. These results are at odds with extant explanations of the effects of index changes that imply a symmetric price response to additions and deletions. A possible explanation for asymmetric price effects arises from the changes in investor awareness. Results from our empirical tests support the thesis that changes in investor awareness contribute to the asymmetric price effects of S&P 500 index additions and deletions.THE LONG-HELD ASSUMPTION that stocks have perfect substitutes, and the perfect elasticity of demand that follows from it, is central to modern finance theory. If securities have (almost) perfectly elastic demand, then any supply or demand shocks that are devoid of information should have no effect on the prevailing price. Early empirical research on whether price changes occur in the absence of new information focused on block trades, equity issues, and stock splits, but was unable to exclude information effects around these events.Since there is no obvious reason to believe, ex ante, that index changes contain new information, they constitute a natural framework for testing whether stocks have almost perfectly elastic or horizontal demand curves. A stock's excess return around such changes could be consistent with a downward sloping demand curve. With the advent of indexed mutual funds in 1976, and the public announcement of S&P index changes in the same year, there is much evidence that such announcements are accompanied by an increase in price for firms added to the index.If stocks have a short-term downward sloping demand curve, the price should be momentarily affected by a demand shock due to indexing, but that effect

We argue that short sellers a¡ect prices in a signi¢cant and systematic manner. In particular, we contend that speculative short sales contribute to the weekend e¡ect: The inability to trade over the weekend is likely to cause these short sellers to close their speculative positions on Fridays and reestablish new short positions on Mondays causing stock prices to rise on Fridays and fall on Mondays.We ¢nd evidence in support of this hypothesis based on a comparison of high short-interest stocks and low short-interest stocks, stocks with and without actively traded options, IPOs, zero short-interest stocks, and highly volatile stocks.IN THIS PAPER, we empirically examine whether speculative short sales a¡ect prices in a systematic manner. The focus is on the weekend e¡ect that has remained an unexplained anomaly. Beginning with French (1980) and Gibbons and Hess (1981), there is much evidence in support of higher returns on Fridays and lower returns on Mondays. Keim and Stambaugh (1984) ¢nd that Friday returns are lower when there is Saturday trading. Ariel (1990) ¢nds that a signi¢-cantly larger number of stocks rises preholiday than postholiday. Empirical evidence related to more recent periods points to an insigni¢cant weekend e¡ect for large ¢rms but continuance of the weekend e¡ect for an equally weighted index as documented herein. 1 Many potential explanations of the weekend e¡ect have been proposed and investigated: measurement errors (Gibbons and Hess (1981) and Keim and Stambaugh (1984)); delay between trading and settlement in stocks (Dyl and Martin (1985) and Lakonishok and Levi (1982)); specialist related biases in prices (Keim and Stambaugh); timing of corporate releases after Friday's close (Damodaran (1989)); reduced institutional trading and greater individual trading on Mondays

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