The index effect is fading, says S&P study
Stock pickers like to keep an eye on companies that might soon be included in a major index in the hope that index trackers will boost those share prices. But a study by Standard & Poor’s (S&P) shows that excess returns for US stocks associated with index addition announcements – or the ‘index effect’ – have diminished sharply over time. And there are structural reasons why that trend will continue.
According to the study, the median excess returns between announcement date and effective date of
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