What is ‘S&P Phenomenon’
The tendency for a stock that has been recently added to the S&P composite index to experience a temporary price increase. The S&P index to which this phenomenon refers to is the S&P 500 – the Standard & Poor’s index that is based on 500 leading companies in predominant industries of the U.S. economy. When a stock is newly added to the S&P composite index, it is often accompanied by a significant number of buy orders as many S&P-related index funds add the particular instrument to their portfolios. This increase in buy orders temporarily drives up the price, creating the S&P phenomenon.
Explaining ‘S&P Phenomenon’
The S&P 500 is often considered the best single gauge of the large cap U.S. equities market. The index, which was first published in 1957, is followed by many traders and investors as a means of keeping a pulse on the overall market. The index is maintained by the S&P Index Committee, which includes Standard & Poor’s economists and index analysts. This team meets regularly to monitor the index and to consider and implement changes to the index.
Criteria for index additions include: being a U.S. company, market capitalization in excess of $4 billion, a public float of at least 50%, financial viability, adequate liquidity and reasonable price, sector representation and company type.
Criteria for index removals include: violation of one or more index inclusion criteria, mergers, acquisitions or restructuring that changes inclusion status.
- Using neural networks for forecasting volatility of S&P 500 Index futures prices – www.sciencedirect.com [PDF]
- Style momentum within the S&P-500 index – www.sciencedirect.com [PDF]
- Does delisting from the S&P 500 affect stock price? – www.tandfonline.com [PDF]
- Tracking S&P 500 index funds – jpm.pm-research.com [PDF]
- Forecasting S&P-100 stock index volatility: The role of volatility asymmetry and distributional assumption in GARCH models – www.sciencedirect.com [PDF]
- The geography of S&P 500 stock returns – www.tandfonline.com [PDF]
- The fear and exuberance from implied volatility of S&P 100 index options – www.jstor.org [PDF]
- Predicting the daily covariance matrix for s&p 100 stocks using intraday data—but which frequency to use? – www.tandfonline.com [PDF]