An Anatomy of the “S&amp;P Game”: The Effects of Changing the Rules

Beneish, Messod Daniel; Whaley, Robert E.

doi:10.1111/j.1540-6261.1996.tb05231.x

Cited by 250 publications

(227 citation statements)

References 12 publications

Supporting

Mentioning

203

Contrasting

Unclassified

Order By: Relevance

“…Abnormal volume performance was estimated using volume ratios, a method also employed by Harris and Gurel (1986) and Beneish and Whaley (1996). The average relative stock-to-S&P 500 volume ratios were estimated over a period of 12 weeks (60 trading days) before the event period, considered as the base volume for each added stock.…”

Section: Abnormal Trading Volumementioning

confidence: 99%

Is There a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices

Kappou

Oikonomou

2014

J Bus Ethics

View full text Add to dashboard Cite

This study investigates the financial effects of additions to and deletions from two of the most well-known social stock indices: the Calvert social index and the MSCI KLD 400 index. By examining not only short-term abnormal returns but also trading activity, earnings per share and long-term performance of stocks that are involved in these events, we are able to shed new light on the characteristics of the "social index effect". We find that the addition of a stock to either index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns of approximately -1.5% in the short run that can reach -14% six months after the event. Trading volumes for deleted stocks are significantly increased on the event date and operational performance of the respective firms deteriorates after their deletion from the social index. These findings are consistent with the asymmetric financial effects of corporate social performance that are connected to social index re-compositions. Keywords

show abstract

Section: Abnormal Trading Volumementioning

confidence: 99%

Is There a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices

Kappou

Oikonomou

2014

J Bus Ethics

View full text Add to dashboard Cite

show abstract

“…Once the index rebalancing process is completed, demand curves and prices revert to their original levels. However, Beneish and Whaley (1996) attribute the reverse in liquidity improvements following additions to the price pressure of arbitrageurs who tend to buy potential additions beforehand and sell them to the index funds on the effective dates.…”

Section: Related Literaturementioning

confidence: 99%

“…Some studies, including Pruitt and Wei (1989), Beneish and Whaley (1996), Doeswijk (2005) and Vespro (2006), find that the effect of index revisions on the underlying stock liquidity is short-lived. The temporary improvement in stock market liquidity is commonly attributed to the trading effects of index funds and arbitrageurs.…”

Section: Related Literaturementioning

confidence: 99%

“…First, existing studies (e.g. Pruitt and Wei, 1989;Beneish and Whaley, 1996;Doeswijk, 2005;Vespro, 2006;Becker-Blease and Paul, 2006;Gregoriou and Nguyen, 2010) usually focus on the impact of index revisions on a single dimension of individual stock liquidity. Liu (2006) argues that since liquidity is multidimensional, conventional measures, such as trading volume, bid-ask spread and Amihud's (2002) illiquidity ratio, may not fully capture the liquidity risk.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Index revisions, systematic liquidity risk and the cost of equity capital

Mazouz

Daya

Yin

2014

Journal of International Financial Markets, Institutions and Mo

View full text Add to dashboard Cite

This study investigates the impact of FTSE100 index revisions on firms' systematic liquidity risk and the cost of equity capital. We show that index membership enhances all aspects of liquidity, whereas stocks that leave the index exhibit no significant liquidity change. We also show that the liquidity risk premium and the cost of equity capital decline significantly after additions, but do not exhibit any significant change following deletions. The control sample analysis indicates that observed decline in liquidity premium and the cost of equity capital is not driven by factors other than index revisions. Our evidence is consistent with Amihud and Mendelson's (1986) argument that since liquidity is priced, an increase in liquidity will result in lower expected returns. Furthermore, the asymmetric impact of additions and deletions on stock liquidity and cost of capital is consistent with the view that the benefits of index membership are permanent (see, e.g. Chen et al. 2004Chen et al. , 2006. JEL Classification: G12, G32

show abstract

“…The authors re-examine individual stock additions to the S&P 500 stock index and report significantly steeper demand curves for stocks with higher levels of arbitrage 1 See also Garry and Goetzmann (1986), Harris and Gurel (1986), Dillon and Johnson (1991), Beneish and Whaley (1996), Lynch and Mendenhall (1997), and Kappou, Brooks and Ward (2010), among others, for US stock index data and Chakrabarti et al (2005) for international evidence. Hau, Massa and Peress (2010) present evidence that a December 2000 reweighting of the MSCI international equity index affected exchange rates.…”

Section: Related Literaturementioning

confidence: 99%

Financial asset demand is elastic: Evidence from new issues of Federal Home Loan Bank debt

Atanasov

Merrick

2011

Journal of Banking & Finance

View full text Add to dashboard Cite

Waters for providing valuable insights into the workings of the FHLB System's Office of Finance and for access to the FHLB discount note data. We are especially grateful to Scott Frame for detailed suggestions that have significantly improved the paper. We are indebted to John Boschen, Robin Greenwood, Rachna Prakash, Katharina Reinhard, Claire Rosenfeld, Clovis Rugemintwari, Vijay Singal and seminar participants at the 2010 FMA European Conference, the French Finance Association 2010 International Spring Meeting, Virginia Tech and the College of William and Mary for helpful comments. We also thank Chuck Andreatta, Lee Grandy and Brad Hill for providing the Treasury bill issuance data. The opinions, findings, conclusions, and recommendations expressed herein are those of the authors and do not necessarily reflect those of the Office of Finance of the FHLB System. The authors are solely responsible for any remaining errors.Electronic copy available at: http://ssrn.com/abstract=1452910 ABSTRACTWe estimate the slope of the demand curve for newly auctioned FHLB discount notes and investigate the impacts of arbitrage risk and heterogeneity of investor beliefs on demand elasticity. Our unique dataset of roughly 2,900 observations of two price-quantity pairs-the first from a pre-auction dealer survey, the second from actual auction results-provides the quantity shift necessary to identify demand. In contrast to previous findings of downwardsloping demand curves for equities, we show that demand for newly issued FHLB notes is nearly perfectly elastic during normal market conditions. We find, however, that frictions like arbitrage risk and, to a lesser extent, heterogeneity of investor beliefs negatively affect elasticity and explain the nearly 50% drop in elasticity observed during the recent financial crisis.

show abstract

An Anatomy of the “S&P Game”: The Effects of Changing the Rules

Cited by 250 publications

References 12 publications

Is There a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices

Is There a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices

Index revisions, systematic liquidity risk and the cost of equity capital

Financial asset demand is elastic: Evidence from new issues of Federal Home Loan Bank debt

Contact Info

Product

Resources

About