It turns out empirically that when a stock that was previously not included in the S&P500 Index is included, and one that was in the index is excluded, there are price impacts to both stocks.

1. If the announcement of the change in the composition of the index was made 2 weeks prior to the change, what would you expect to happen in the two weeks leading up to the change? Why?
2. What would you expect to happen to the prices of the stocks on the day of the change? Why?