Asymmetric stock price and investor awareness reactions to changes in the Nasdaq 100 index

We examine market responses to changes in the Nasdaq 100 index membership and find asymmetric stock price and investor awareness reactions. Stocks added to the Nasdaq 100 index for the first time experience permanent price gains and significant increases in investor awareness, whereas repeated additions and new deletions exhibit temporary stock price changes and no significant changes in investor awareness. Stock liquidity improves for new additions and repeated additions but worsens for new deletions. Importantly, investor awareness proxies are significantly related to cumulative abnormal returns around the Nasdaq 100 reconstitution even in the presence of liquidity and other controlling factors. Taken together, the observed results are consistent with the investor awareness hypothesis.