Do Demand Curves for Small Stocks Slope Down?

Posted: 22 Aug 2003

See all articles by Ernest N. Biktimirov, Ph.D., CFA

Ernest N. Biktimirov, Ph.D., CFA

Brock University, Goodman School of Business

Arnold R. Cowan

Iowa State University

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

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 a number of 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.

JEL Classification: G12, G14

Suggested Citation

Biktimirov, Ernest N. and Cowan, Arnold R. and Jordan, Bradford D., Do Demand Curves for Small Stocks Slope Down?. Available at SSRN: https://ssrn.com/abstract=417801

Ernest N. Biktimirov

Brock University, Goodman School of Business ( email )

1812 Sir Isaac Brock Way
St. Catharines, Ontario L2S 3A1
Canada
905-688-5550 Ext. 3843 (Phone)

Arnold R. Cowan

Iowa State University ( email )

College of Business
3344 Gerdin Business Building
Ames, IA 50011-1350
United States

HOME PAGE: http://www.bus.iastate.edu/arnie

Bradford D. Jordan (Contact Author)

University of Florida ( email )

Gainesville, FL 32611
United States

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

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