Analysis of the probability of deletion of S&P 500 companies: Survival analysis and neural networks approach

We examine the probability of deletion of a firm from the S&P 500 index due to a decision of the index committee because the firm did not satisfy the index committee criteria. We study the probability of deletion with survival analysis and neural networks methods. We document that deletion might be predictable, which is contrary to the findings of most studies that the market cannot predict the timing of a company deletion from the S&P 500 index. It might also be beneficial to know ahead of time which company might be deleted from an index, to supplement the arbitrage opportunities that exist already in the announcement-effective date event window.

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