Abstract
This paper investigates the performance and characteristics of survivor stocks in the S&P 500 index. Using both in-sample and out-of-sample comparisons, survivor stocks outperformed this market index by a considerable margin. Relative to other S&P 500 index companies, survivor stocks tend to be small-value stocks that exhibit high profitability and invest conservatively. Surprisingly, survivor stocks tend to be loser stocks with negative exposure to the momentum factor. Further analyses show that the volatility of the survivor stocks portfolio is less exposed to tail risks and responds less to shocks in the innovation process.
Highlights
We examined the average characteristics of survivor stocks relative to the underlying S&P 500 index
Even though survivor companies engaged in mergers and acquisitions over time (Siegel and Schwartz 2006), our findings suggest that survivor companies grew smaller in size relative to the S&P 500 index in general
Companies listed in the S&P 500 index are special in the sense that they are leading companies influential to the U.S and global economies
Summary
Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. 2007 announcement and use the CRSP database to retrieve data for all survivor firms that exist until December 2019 but may have dropped out of the S&P 500 index in the ex post 2 March 2007 announcement period We refer to this stock portfolio as all survivors. The survivor stock portfolio exhibits a monthly standard deviation of returns equal to 3.94%, which is slightly lower that of the S&P 500 index at 4.27%. Relevant to these comparisons, it is important to bear in mind that the number of stocks in RETSURV.
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