Publications
Publications
- 2022
- HBS Working Paper Series
The Disappearing Index Effect
By: Robin Greenwood and Marco Sammon
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
Citation
Greenwood, Robin, and Marco Sammon. "The Disappearing Index Effect." Harvard Business School Working Paper, No. 23-025, December 2022.