Personal Finance & Money Asked on July 31, 2021
As I understand it, inclusion of a company in the S&P500 means all ETFs that track the S&P, and some of their derivatives, must buy stock in that company. I would expect this to be a noticeable boost to the share price in the short term – the funds must buy at any price, after all.
Last week, 3 companies were added to the S&P 500. Of these, 2 experienced a brief jump on Monday, then went on to noticeable losses. It might be because both are gambling companies, but it still seems strange to see them fall so much right before inclusion in an index fund.
Is it because ETFs only start buying on the official date (next Monday?). Are the tracking funds allowed to buy in advance, spreading out the price variations?
You are assuming that a stock will jump after the inclusion into an index is announced. However there is some issues with your assumption:
Correct answer by Manziel on July 31, 2021
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