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 to 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.

BREAKING DOWN 'S&P Phenomenon'

The S&P 500 is often 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: being a U.S. company, market capitalization in excess of $4 billion, a public float of at least 50%, financial viability, adequate liquidity and reasonable price, sector representation and company type.

Criteria for index removals include: violation of one or more index inclusion criteria, mergers, acquisitions or restructuring that changes inclusion status.

RELATED TERMS
  1. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  2. Standard & Poor's - S&P

    The world's leading index provider and the foremost source of ...
  3. Composite

    A grouping of equities, indexes or other factors combined in ...
  4. S&P 600

    An index of small-cap stocks managed by Standard and Poor's. ...
  5. Total Return Index

    A type of equity index that tracks both the capital gains of ...
  6. S&P MidCap 400 Index

    This Standard & Poor's index serves as a barometer for the U.S. ...
Related Articles
  1. Investing

    S&P 500 Index: A Performance Analysis of Long-Term Returns

    Discover how to gain insight into the returns generated by the S&P 500 Index over the long term and how this can assist your investment goals.
  2. Investing

    The Pros and Cons of Indexes

    Learn about the advantages and disadvantages of stock indexes and passive index funds. Discover how there is an opportunity cost to using index funds.
  3. Investing

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.
  4. Insights

    What's a Market Index?

    A market index combines several stocks to create one aggregate value that’s used to measure a market’s or sector’s performance.
  5. Investing

    What are Index Funds?

    An index fund is a type of mutual fund that is tied to a broad stock index like the S&P 500 or the Dow Jones Industrial Average, instead of being handpicked and managed by an investment manager. ...
  6. Insights

    An Introduction to Stock Market Indices

    Investopedia explains the five most talked about indices and what makes them all different.
  7. Investing

    This Bull Market Is Supported by the Index Funds Investment

    The massive growth of index funds has been supporting the bull market and could lead to a steeper correction when it happens.
  8. Investing

    3 Types Of Indexing For ETF Success

    ETF success relies on the index with which it's paired. Discover three index genres for tracking average market performance.
  9. Trading

    Using Index Futures To Predict The Future

    Want to know whether the stock market will open up or down? Check out the index futures.
  10. Insights

    Investment Fundamentals: S&P 500 Index Vs. Russell 1000 Index

    Learn about the similarities and differences between the S&P 500 and the Russell 1000 indices, and discover why investors may choose one over the other.
RELATED FAQS
  1. What are the pros and cons of using the S&P 500 as a benchmark?

    Learn about the advantages and disadvantages of using the S&P 500 as a benchmark for portfolio performance, and understand ... Read Answer >>
  2. Where can I find a list of all of the stocks in the S&P 500?

    The actual list of all 500 stocks in the S&P 500 is called the Constituent List. It can be found on the official Standard ... Read Answer >>
  3. How do indexes determine which stocks are removed or added to them?

    Stock indexes are formed based on the kinds of stocks or financial securities they want to track. For example, the Standard ... Read Answer >>
  4. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
  5. What are the most important equity market indexes?

    Discover the most important equity market indexes. Stock market indexes are tools to evaluate the performance of the stock ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center