To minimize tracking error, Samp;P 500 index funds often follow inflexible, nearly exact replication strategies. This inflexibility causes stocks with relatively low floating supply to experience abnormally high negative or positive returns upon addition or deletion on average. Moreover, the...

The largest Samp;P 500 indexers replicate the index with tracking errors of just several basis points per year. Maintaining such small errors requires a nearly exact-replication strategy and precludes profiting from trading much before or after index changes. A strategy of trading at the open...

This manuscript reviews the evolving literature on the pricing of assets and the structure of financial markets. It begins with the development of early stock valuation models and proceeds to a description of the efficient-market hypothesis. The survey then examines recent empirical data that...