Do Demand Curves for Small Stocks Slope Down?

Do Demand Curves for Small Stocks Slope Down? Stocks added to the S&P 500 generally experience positive abnormal returns following the announcement. Several competing explanations exist for this reaction, but small sample sizes and other issues make it difficult to distinguish among them. We examine this subject using the small‐cap Russell 2000 index, which has several advantages over the S&P 500 in this context. Our primary finding is that stocks added to or deleted from the Russell 2000 experience significant changes in stock price and trading volume, but the effect is transitory. The results support the price pressure hypothesis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Financial Research Wiley

Do Demand Curves for Small Stocks Slope Down?

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Publisher
Wiley
Copyright
Copyright © 2004 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0270-2592
eISSN
1475-6803
D.O.I.
10.1111/j.1475-6803.2004.t01-1-00077.x
Publisher site
See Article on Publisher Site

Abstract

Stocks added to the S&P 500 generally experience positive abnormal returns following the announcement. Several competing explanations exist for this reaction, but small sample sizes and other issues make it difficult to distinguish among them. We examine this subject using the small‐cap Russell 2000 index, which has several advantages over the S&P 500 in this context. Our primary finding is that stocks added to or deleted from the Russell 2000 experience significant changes in stock price and trading volume, but the effect is transitory. The results support the price pressure hypothesis.

Journal

The Journal of Financial ResearchWiley

Published: Jun 1, 2004

References

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