@article {Cooper62, author = {Daniel Cooper and Geoffrey Woglom}, title = {The S\&P 500 Effect}, volume = {12}, number = {4}, pages = {62--73}, year = {2003}, doi = {10.3905/joi.2003.319569}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This is an analysis of the effect on a company{\textquoteright}s stock price of adding it to the S\&P 500 index. A simple theoretical model is developed to show how trading effects and changes to fundamentals should affect the price of S\&P 500 additions upon announcement and in the long run. The model predicts a company added to the S\&P 500 should experience an initial price increase and then a reversal of this price increase, owing to the predicted increased stock price volatility of companies post-addition. All these effects should strengthen over time with the increasing importance of S\&P 500 indexed mutual funds. Tests of the model using a sample of 303 S\&P 500 index additions between 1978 and 1998 produce generally consistent with predictions, particularly in the most recent period, when it appears that a post-addition increase in stock price volatility reverses almost all the initial price increase.}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/12/4/62}, eprint = {https://joi.pm-research.com/content/12/4/62.full.pdf}, journal = {The Journal of Investing} }