Question
COKE Corporation is one of the major components of the QRST stock index, and large numbers of shares of COKE are included in index funds
COKE Corporation is one of the major components of the QRST stock index, and large numbers of shares of COKE are included in index funds tracking QRST (these are funds set up so that investors can easily invest in the entire stock market at once, rather than in individual stocks). A major crisis hits the market, negatively impacting the growth prospects of many firms listed on QRST. COKE, however, was well insured against this possibility, and is expected to easily weather the crisis with no impact to its projected dividend growth rate. Despite this, when the crisis hits, investors holding index funds tracking QRST want to sell, since the overall market is negatively affected. This means that COKE stocks will be sold too, as a part of the index funds. The price of COKE stock falls. Explain what you think will happen to COKEs stock price over time.
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