Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/60841 
Title: 

Comovement revisited

The document was removed on behalf of the author(s)/ the editor(s).

Year of Publication: 
2011
Series/Report no.: 
Staff Report No. 484
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
We find, unlike earlier studies, that there is no rise in the market betas of stocks that enter the S&P 500 index when the estimated factor model is that of Fama and French (1993). We also find that SMB and HML factor betas decline after the stocks are added to the index. This decline is explained by strong increases in earnings and in the market value of the event stocks in the period around - and, in particular, prior to - their inclusion in the index. We suggest that inclusions to the S&P 500 index are informative events that trigger a reassessment of the risk of newly added firms by drawing the broad market's attention to their extraordinary growth in size and profitability.
Subjects: 
S&P 500 index additions
comovement
Fama-French factors
attentiongrabbing event
earnings and size growth
market expectations
risk
JEL: 
G10
G12
G14
Document Type: 
Working Paper

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