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  • 2022
  • Working Paper
  • HBS Working Paper Series

The Disappearing Index Effect

By: Robin Greenwood and Marco Sammon
  • Format:Print
  • | Language:English
  • | Pages:53
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Abstract

The abnormal return associated with a stock being added to the S&P 500 has fallen from an average of 3.4% in the 1980s and 7.6% in the 1990s to 0.8% over the past decade. This has occurred despite a significant increase in the percentage of stock market assets linked to the index. A similar pattern has occurred for index deletions, with large negative abnormal returns on average during the 1980s and 1990s, but only -0.6% between 2010 and 2020. We investigate potential drivers of this surprising phenomenon and discuss the implications for market efficiency.

Keywords

Stocks; Investment Return

Citation

Greenwood, Robin, and Marco Sammon. "The Disappearing Index Effect." Harvard Business School Working Paper, No. 23-025, December 2022.
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About The Authors

Robin Greenwood

Finance
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Marco Sammon

Finance
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    The Retail Habitat

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    Retail Investors’ Contrarian Behavior Around News, Attention, and the Momentum Effect

    By: Cheng (Patrick) Luo, Enrichetta Ravina, Marco Sammon and Luis M. Viceira
    • May 2022
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    Third Point in 2020: Growth is Where the Value is? (B)

    By: Robin Greenwood and Denise Han
More from the Authors
  • The Retail Habitat By: Toomas Laarits and Marco Sammon
  • Retail Investors’ Contrarian Behavior Around News, Attention, and the Momentum Effect By: Cheng (Patrick) Luo, Enrichetta Ravina, Marco Sammon and Luis M. Viceira
  • Third Point in 2020: Growth is Where the Value is? (B) By: Robin Greenwood and Denise Han
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