Article2004

Do Demand Curves for Small Stocks Slope Down?

Ernest N. Biktimirov · Arnold Richard Cowan · Bradford D. Jordan

85 citations0/0 files storedThe Journal of Financial Research

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

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.

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References

1993Common risk factors in the returns on stocks and bonds 1986Asset pricing and the bid-ask spread 1986Do Demand Curves for Stocks Slope Down?1975Price performance of common stock new issues 1986Price and Volume Effects Associated with Changes in the S&P 500 List: New Evidence for the Existence of Price Pressures 2000Demand Curves for Stocks Do Slope Down: New Evidence from an Index Weights Adjustment 1987The Effect on Stock Price of Inclusion in or Exclusion from the S&P 500 1989The behavior of daily stock market trading volume

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