Bon Mots
The news that Tesla (TSLA) will soon be entering the S&P 500 left me triply entertained.
First, I had not realized that Tesla was not already in the index. Perhaps there is a reason that my columns are free. Second, the announcement served as a reminder that the S&P 500 is a strange construction, being neither a pure representation of the largest U.S. stocks nor a “strategic-beta” benchmark that aims to outgain the norm. It is mostly the former, with a splash of the latter.
Third, Tesla’s stock immediately jumped 13%, which makes no sense, because Standard & Poor’s decision was inevitable. If not this month, then next month. Even if membership in the S&P 500 confers permanent value--which is questionable--that action should already have been baked into Tesla’s quote. But I suppose that even finance professors don’t believe that Tesla is efficiently priced.
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