Portland General Electric’s stock made a move in after-hours trading late Friday on news that the company was being added to the S&P MidCap 400 stock index.
After closing trading at $47, PGE’s stock (NYSE: POR) at first rose slowly and then quickly shot up to $51.24 when a 5:15 p.m. EDT news release from S&P Dow Jones went out. That’s a 9% gain.
New entrants to stock indexes frequently see a bump as funds that track the index quickly adjust their portfolios. Companies removed from indexes similarly droop.
McKinsey research into movements in and out of the S&P 500 suggests the benefit from inclusion in an index is short-lived, fading significantly within a few weeks and disappearing entirely within 45 days.
“This result is consistent with the phenomenon of liquidity pressure driving up share prices initially as investors adjust their portfolios and prices subsequently reverting to ‘normal’ when portfolios are rebalanced,” the firm reported.
The MidCap 400 is billed as a benchmark for midsized companies. To be included, companies must have an unadjusted market cap of $3.7 billion to $14.6 billion, among other factors. PGE closed Friday with a market cap of $4.2 billion.
PGE’s move into the index goes into effect before trading begins next Wednesday.