Is S&P 500 Membership for Sale?

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sunnywindy
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Is S&P 500 Membership for Sale?

Post by sunnywindy »

I came across this interesting article today:

https://www.fa-mag.com/news/s-p-500-mem ... 64362.html

I do not think that if some games are being played by S&P that it would influence or hurt investor returns because the majority of the returns come from the top and S&P doesn't have much or any discretion on that. So, there's probably nothing to fear. (I will add that Tesla's late inclusion to the 500 index revealed S&P's methodology flaws in my opinion).
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000
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Re: Is S&P 500 Membership for Sale?

Post by 000 »

Interesting. Another reason to be happy using the total market tracking CRSP index.
Jack&Warren disciple
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Pay to Play? Anyone read this yet?

Post by Jack&Warren disciple »

[Thread merged into here --admin LadyGeek]

NBER WORKING PAPER SERIES
IS STOCK INDEX MEMBERSHIP FOR SALE?
Kun Li
Xin (Kelly) Liu
Shang-Jin Wei
Working Paper 29365
http://www.nber.org/papers/w29365
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
October 2021

From Reuters, 10/15/21 https://www.reuters.com/breakingviews/r ... 021-10-15/

"A working paper this month published by the National Bureau of Economic Research suggests companies that pay for credit ratings from S&P Global, which also owns the indexing business, “appear to improve their chance of entering the index.”

Causation is hard to demonstrate conclusively. But where humans participate in decisions that can involve billions of dollars, other humans will try to influence them, and still, others will become suspicious of their motives and incentives. When the sums involved reach trillions of dollars, the industry’s integrity is at stake."

Doesn't Warren Buffett own a significant stake in Moody's analytics? From the Abstract on the NBER Paper: "We show
that firms’ purchases of S&P ratings appear to improve their chance of entering the index (but
purchases of Moody’s ratings do not). Furthermore, firms tend to purchase more S&P ratings
when there are openings in the index membership. Such a pattern is also confirmed by an event
study that explores a rule change on index membership in 2002. Finally, discretionary additions
exhibit subsequent deterioration in financial performance relative to rule-based additions."
jarjarM
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Re: Pay to Play? Anyone read this yet?

Post by jarjarM »

There was another thread on this:
viewtopic.php?p=6277183

Limited response, but agree that total market is the way to go.
sycamore
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Re: Pay to Play? Anyone read this yet?

Post by sycamore »

Jack&Warren disciple wrote: Tue Oct 19, 2021 6:26 pm ...
Doesn't Warren Buffett own a significant stake in Moody's analytics?
According to https://www.cnbc.com/berkshire-hathaway-portfolio/

Code: Select all

Company			Symbol	Holdings	Mkt. price	Value	Stake
Moody’s Corporation	MCO	24,669,778	$378.96	$9,348,859,071	13.2%
which seems significant.
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Re: Is S&P 500 Membership for Sale?

Post by LadyGeek »

I merged Jack&Warren disciple's thread into the ongoing discussion.

(Thanks to the member who reported the post and provided a link to this thread.)
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alex_686
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Re: Is S&P 500 Membership for Sale?

Post by alex_686 »

000 wrote: Sat Oct 16, 2021 1:07 am Interesting. Another reason to be happy using the total market tracking CRSP index.
EDIT - I think I am off point. The link is between payment for credit bond serves and inclusion into the index.

This is off point. As well as the title of this thread.

The article is about S&P's bond ratings, not about the S&P equity indexes.

I have not read the article but reporting and handling of this conflict of interest has been around for a long time.
Last edited by alex_686 on Tue Oct 19, 2021 8:03 pm, edited 1 time in total.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Jack&Warren disciple
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Re: Pay to Play? Anyone read this yet?

Post by Jack&Warren disciple »

sycamore wrote: Tue Oct 19, 2021 7:36 pm
Jack&Warren disciple wrote: Tue Oct 19, 2021 6:26 pm ...
Doesn't Warren Buffett own a significant stake in Moody's analytics?
According to https://www.cnbc.com/berkshire-hathaway-portfolio/

Code: Select all

Company			Symbol	Holdings	Mkt. price	Value	Stake
Moody’s Corporation	MCO	24,669,778	$378.96	$9,348,859,071	13.2%
which seems significant.
I switched over to the Russell 3000 from the S&P 500 around 2000 and now in the VTI. It holds about 1.1% in Berkshire Hathaway, the VTI probably also owns S&P, if it's publically traded. It just seems hard to miss out on prosperity with such a broad index like Russell 3000 or CRISP.
000
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Re: Is S&P 500 Membership for Sale?

Post by 000 »

alex_686 wrote: Tue Oct 19, 2021 7:43 pm I think I am off point. The link is between payment for credit bond serves and inclusion into the index.
Perhaps soon the S&P 500 will be viewed as just another anachronism like the DOW 30.
Grt2bOutdoors
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Re: Pay to Play? Anyone read this yet?

Post by Grt2bOutdoors »

Jack&Warren disciple wrote: Tue Oct 19, 2021 7:57 pm
sycamore wrote: Tue Oct 19, 2021 7:36 pm
Jack&Warren disciple wrote: Tue Oct 19, 2021 6:26 pm ...
Doesn't Warren Buffett own a significant stake in Moody's analytics?
According to https://www.cnbc.com/berkshire-hathaway-portfolio/

Code: Select all

Company			Symbol	Holdings	Mkt. price	Value	Stake
Moody’s Corporation	MCO	24,669,778	$378.96	$9,348,859,071	13.2%
which seems significant.
I switched over to the Russell 3000 from the S&P 500 around 2000 and now in the VTI. It holds about 1.1% in Berkshire Hathaway, the VTI probably also owns S&P, if it's publically traded. It just seems hard to miss out on prosperity with such a broad index like Russell 3000 or CRISP.
It is publicly traded - SPGI, prior to that it was part of McGraw-Hill Companies which was also publicly traded.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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