Journal article
S&P 500 Trading Strategies and Stock Betas
The Review of financial studies, Vol.7(1), pp.215-251
04/01/1994
DOI: 10.1093/rfs/7.1.215
Abstract
This paper shows that S&P 500 stock betas are overstated and the non-S&P 500 stock betas are understated because of liquidity price effects caused by the S&P 500 trading strategies. The daily and weekly betas of stocks added to the S&P 500 index during 1985-1989 increase, on average, by 0.211 and 0.130. The difference between monthly betas of otherwise similar S&P 500 and non-S&P 500 stocks also equals 0.125 during this period. Some of these increases can be explained by the reduced nonsynchroneity of S&P 500 stock prices, but the remaining increases are explained by the price pressure or excess volatility caused by the S&P 500 trading strategies. I estimate that the price pressures account for 8.5 percent of the total variance of daily returns of a value-weighted portfolio of NYSE/AMEX stocks. The negative own autocorrelations in S&P 500 index returns and the negative cross autocorrelations between S&P 500 stock returns provide further evidence consistent with the price pressure hypothesis.
Details
- Title: Subtitle
- S&P 500 Trading Strategies and Stock Betas
- Creators
- Anand M. Vijh - University of Southern California
- Resource Type
- Journal article
- Publication Details
- The Review of financial studies, Vol.7(1), pp.215-251
- Publisher
- Oxford University Press
- DOI
- 10.1093/rfs/7.1.215
- ISSN
- 0893-9454
- eISSN
- 1465-7368
- Language
- English
- Date published
- 04/01/1994
- Academic Unit
- Finance
- Record Identifier
- 9984380739902771
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