Analysis of Firm Risk around S&P 500 Index Changes
AbstractIn this study we extend the work of Vijh (1994), Barberis, Shleifer, and Wurgler (2005), Denis, McConnell, Ovtchinnikov and Yu (2003) and Geppert, Ivanov and Karels (2011) by examining the effects of the addition to or deletion from the S&P 500 index on the firm's Fama - French four factor model loadings before and after the event. We find that added to and deleted from the S&P 500 index firms experience unique sensitivity to the Small cap minus Big cap (SMB) and momentum (UMD) factors. This finding and robustness tests indicate that addition to and deletion from the S&P 500 index have a unique and profound fundamental effect on the added and deleted firm.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 2 ()
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Beta Changes; S&P500 Constituents Changes; Fama-French Factor Loadings;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- G3 - Financial Economics - - Corporate Finance and Governance
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"A Variance Decomposition for Stock Returns,"
3207695, Harvard University Department of Economics.
- Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
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