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| Author: | Denis, D. K. (et al) |
| Title: | S&P 500 Index additions and earnings expectations |
| Journal: | Journal of Finance
2003 : OCT, VOL. 58:5, p. 1821-1840 |
| Index terms: | Share prices Stock returns Corporate earnings |
| Language: | eng |
| Abstract: | Stock price increases associated with addition to the S&P 500 Index have been interpreted as evidence that demand curves for stocks slope downward. A key premise underlying this interpretation is that Index inclusion provides no new information about companies' future prospects. The authors examine this premise by analyzing analysts' earnings per share (eps) forecasts around Index inclusion and by comparing postinclusion realized earnings to preinclusion forecasts. Relative to benchmark companies, companies newly added to the Index experience significant increases in eps forecasts and significant improvements in realized earnings. The results indicate that S&P Index inclusion is not an information-free event. |
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