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S&P Phenomenon

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Dictionary Says

Definition of 'S&P Phenomenon'

The tendency for a stock that has been recently added to the S&P composite index to experience a temporary price increase. The S&P index to which this phenomenon refers is the S&P 500 – the Standard & Poor’s index that is based on 500 leading companies in predominant industries of the U.S. economy. When a stock is newly added to the S&P composite index, it is often accompanied by a significant number of buy orders as many S&P-related index funds add the particular instrument to their portfolios. This increase in buy orders temporarily drives up the price, creating the S&P phenomenon.
Investopedia Says

Investopedia explains 'S&P Phenomenon'

The S&P 500 is considered the best single gauge of the large cap U.S. equities market. The index, which was first published in 1957, is followed by many traders and investors as a means of keeping a pulse on the overall market. The index is maintained by the S&P Index Committee, which includes Standard & Poor’s economists and index analysts. This team meets regularly to monitor the index and to consider and implement changes to the index. Criteria for index additions include:

·         U.S. Company

·         Market capitalization in excess of $4 billion

·         Public float of at least 50 percent

·         Financial viability

·         Adequate liquidity and reasonable price

·         Sector representation

·         Company type

Criteria for index removals include:

·         Violation of one or more index inclusion criteria

           Mergers, acquisitions or restructuring that changes inclusion status

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