Changes in Trading Volume and Return Volatility Associated with S&P 500 Index Additions and Deletions
Description:
When a stock is added into the S&P 500 Index, it is automatically "cross-listed" in the index derivative markets (i.e., S&P 500 Index futures and Index options). I examined the effects of such cross-listing on the trading volume and return volatility of the underlying component stocks. Traditional finance theory asserts that futures and "cash" markets are connected by arbitrage mechanism that brings both markets to equilibrium. When arbitrage opportunities arise, arbitrageurs buy (sell) the ind…
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Date:
December 2007
Creator:
Lin, Cheng-I Eric