What drives the S&P 500 inclusion effect? An analytical survey

We present an analytical survey of the explanations-price pressure, down ward-sloping demand curves, improved liquidity, improved operating performance, and increased investor awareness-for the increase in stock value associated with inclusion in the S&P 500 Index. We find that increased investor awareness is the primary factor behind the cross-section of abnormal announcement returns. We also find some evidence of temporary price pressure around the inclusion date. We find no evidence that long-run downward-sloping demand curves for stocks, anticipated improvements in operating performance, or increased liquidity are related to the cross-section of announcement or inclusion returns.