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Establishing causation: the index-inclusion effect

You suspect that adding a stock to a major index causes its price to rise (the index-inclusion effect), but index committees choose which companies to add, so you cannot randomize inclusion.

Describe how you would estimate the causal effect from observational data. Name at least two identification strategies and the key assumption each relies on.

Your answer

This one is open-ended. Work it through, then check your reasoning against the full solution.

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