The disappearance of the ‘index effect’ might have one positive: It shows that financial markets have become more efficient. A new study concludes that—at least in the case of the S&P 500—the small rise in share value that once accompanied a stock’s addition to the index has disappeared on average over the past decade. This disappearance of the well-known “index effect” has occurred despite an increase in the amount of money tracking the S&P 500 over the period, says Robin Greenwood, professor of finance and banking at Harvard Business School. He co-wrote the working paper, “The Disappearing Index Effect,” with Marco Sammon, assistant professor of business administration at Harvard Business School.

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