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Analysis of Firm Risk around S&P 500 Index Changes

Author

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  • Stoyu I. Ivanov

    () (San Jose State University)

Abstract

In 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.

Suggested Citation

  • Stoyu I. Ivanov, 2012. "Analysis of Firm Risk around S&P 500 Index Changes," Economics Bulletin, AccessEcon, vol. 32(2), pages 1576-1589.
  • Handle: RePEc:ebl:ecbull:eb-12-00390
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P152.pdf
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    References listed on IDEAS

    as
    1. Campbell, John Y, 1991. "A Variance Decomposition for Stock Returns," Economic Journal, Royal Economic Society, vol. 101(405), pages 157-179, March.
    2. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    3. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Beta Changes; S&P500 Constituents Changes; Fama-French Factor Loadings;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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