Regression Discontinuity and the Price Effects of Stock Market Indexing

Yen-cheng Chang, Harrison Hong, Inessa Liskovich

NBER Working Paper No. 19290
Issued in August 2013
NBER Program(s):   AP   CF

Studies find price increases for additions to the S&P 500 index but no decreases for deletions. Additions come with good earnings news, suggesting these studies are not just measuring an indexing effect. We develop a regression discontinuity design using Russell Indices for cleaner identification. Stocks are assigned to indices based on their end-of-May market capitalizations. Stocks ranked just below 1000 are in the Russell 2000. The indices are value-weighted so these stocks receive index buying whereas those just above 1000 have close to none. Using this random assignment, we find price effects for both additions and deletions.

A non-technical summary of this paper is available in the November 2013 NBER digest.  You can sign up to receive the NBER Digest by email.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


This paper was revised on October 10, 2013

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19290

Users who downloaded this paper also downloaded these:
Rosenzweig and Udry w19334 Forecasting Profitability
Autor, Dorn, Hanson, and Song w19226 Trade Adjustment: Worker Level Evidence
Cutler, Ghosh, and Landrum w19268 Evidence for Significant Compression of Morbidity In the Elderly U.S. Population
Cadena and Kovak w19272 Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession
Pan, Wang, and Weisbach w19330 CEO Investment Cycles
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us