Stock prices

Q:

What’s the “index effect” in the stock market? — R.J., Greensburg, Pa.

A:

First, understand that companies are routinely added to or removed from various indexes — sometimes because they merge with or are acquired by another company, or because they grow too big or small for the index they’re in.

The index effect refers to a change in the price of a stock after it’s added to, or removed from, a major stock index. If a company is added to the S&P 500 index of 500 of America’s biggest companies, its stock price seems likely to rise. After all, there are trillions of dollars invested in index funds. So when that stock is added to the index, all those funds tracking the index will be buying shares; you might expect that kind of demand to push up the stock price, at least for a while. (The reverse would be true for stocks removed.)

Interestingly, though, while the index effect has topped 7 percent in the past, it has nearly disappeared over the last decade; it’s now well below 1 percent.

Q:

How can I invest in Taco Bell? — P.C., Ashland, Ky.

A:

Technically, you can’t, because Taco Bell belongs to parent company Yum! Brands — which also owns KFC, Pizza Hut and the Habit Burger Grill.

You could invest in Yum! Brands, though. Lots of companies are actually subsidiaries of other companies. For example, Pepsico owns Quaker Oats, Lay’s and Gatorade, while Restaurant Brands International owns Burger King, Popeyes and Tim Hortons. Nestle owns Purina and Gerber; Amazon.com owns Zappos and Whole Foods; and a company called Stellantis is home to the Chrysler, Jeep and Maserati brands.