Out of curiosity, I started googling what would happen to the S&P 500 Index when a new stock is listed on it. And I wasn't able to find the answer.
From my understanding, when a new stock enters the list, the hedge fund firms are required to purchase and add that new stock into their portfolios. However, my question is, alternative to what happens to the stock that enters the list, what can potentially happen to the Index itself? Does it mean it might slightly drop as it goes through the purchasing process or does it imply that it's value in fact increases due to addition of a new stock, thus value is added?
Take TSLA for example, there is a potential chance of it being listed on the index, given the Q2 results prove to be profitable.
Can that factor boost S&P 500 value or dampen it?