3 ms·

Price-weighted? Price-weighted? (Market Economics Fairy bangs head against wall.)

• ghshephard 13y ago
  Yes -how insane is that. When I first heard of it, I was almost certain that the person was wrong - but 5 minutes on wikipedia proved they were correct. But, once again - if the automated purchasing for the stock drives the value up too high, then people will make money selling it - I don't buy into the "inclusion in the indexes drives up long term valuation of a company" - would be interested if anybody has a study that shows otherwise.
  • jmalicki 13y ago
    The most interesting example is Royal Dutch vs. Shell Transport. Both companies had equal shares in Shell Oil - Shell Transport was in the S&P 500, Royal Dutch was not, and sold for much less, despite having identical economic interests - until they finally merged in 2005. When Yahoo was added to the S&P 500, its price jumped 24%. The name for this anomaly is usually called the "index effect", and whether it affects valuation is controversial.