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Better Not Forget: On the Memory of S&P 500 Survivor Stock Companies

Author

Listed:
  • Klaus Grobys

    (Finance Research Group, School of Accounting and Finance, University of Vaasa, Wolffintie 34, 65200 Vaasa, Finland)

  • Yao Han

    (College of Finance, Jiangxi University of Finance and Economics, 169 Shuanggang East Avenue, Nanchang 330013, China)

  • James W. Kolari

    (Department of Finance, Mays Business School, Texas A&M University, College Station, TX 77843-4218, USA)

Abstract

This study explores the dependency structure of S&P 500 survivor stocks. Using a hand-collected sample of stocks that survived in the S&P 500 since March 1957, we employ rescaled/range analysis to investigate survivors. First, we find nonlinearities in the return processes of survivor stocks due to Paretian tails. Second, the return processes of very long-lived outliers exhibit long-term memories with Hurst exponents that significantly exceed one half on average. Third, sample-split tests reveal that the memory on average has virtually not changed over time—that is, survivor stocks do not forget. Fourth, and last, the long-term memory of survivor stocks appears to be unrelated to their exposures to traditional asset pricing risk factors.

Suggested Citation

  • Klaus Grobys & Yao Han & James W. Kolari, 2023. "Better Not Forget: On the Memory of S&P 500 Survivor Stock Companies," JRFM, MDPI, vol. 16(2), pages 1-16, February.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:2:p:126-:d:1069879
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    References listed on IDEAS

    as
    1. Honghui Chen & Gregory Noronha & Vijay Singal, 2004. "The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation," Journal of Finance, American Finance Association, vol. 59(4), pages 1901-1930, August.
    2. Grobys, Klaus, 2023. "Correlation versus co-fractality: Evidence from foreign-exchange-rate variances," International Review of Financial Analysis, Elsevier, vol. 86(C).
    3. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    4. Sheng‐Syan Chen & Yueh‐Hsiang Lin, 2018. "The competitive effects of S&P 500 Index revisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(7-8), pages 997-1027, July.
    5. Lindsay Baran & Tao-Hsien Dolly King, 2012. "Cost of Equity and S&P 500 Index Revisions," Financial Management, Financial Management Association International, vol. 41(2), pages 457-481, June.
    6. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    7. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    8. Choi, In, 1999. "Testing the Random Walk Hypothesis for Real Exchange Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 293-308, May-June.
    9. Klaus Grobys, 2022. "On Survivor Stocks in the S&P 500 Stock Index," JRFM, MDPI, vol. 15(2), pages 1-24, February.
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