It’s often noted that a company’s stock gets a bump in value when the company is voted into the Standard & Poor's 500 index, because index fund managers have to buy it. If a company gets booted out, the same managers must sell. Standard & Poor’s announced that Google was being admitted to the S&P 500 index after the U.S. market closed on March 23, 2006. Google went up 7.3% in after-hours trading.
Now, a new study argues that S&P 500 index companies are overvalued, tracing the effect of more money flowing into the index over the last 20 years. Co-author David Nanigian from The American College will present the paper at the New York Stock Exchange next Wednesday, June 29, 2011.
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