The S&P 500's "Invisible Ticket": Revealing Wall Street's Unspoken Rules

Do you think the S&P 500 is an objective “stock-picking machine”? In fact, your pension funds and ETFs might be paying for Wall Street’s “hidden deals.”

The top journal Management Science published a study by Wei Shangjin, Li Kun, and Liu Xin’s team, which provides concrete evidence of conflicts of interest at S&P Global. The S&P 500 Committee has enormous “discretion”: this allows S&P to act as both judge (setting the index) and merchant (selling ratings).

The research team analyzed 30 years of data and found two major pieces of evidence:

First, a horizontal comparison: whenever there was an opening in the index, candidate companies would rush to buy S&P ratings but not Moody’s ratings, which are not included in the index.

Second, a vertical cliff: after S&P banned foreign companies from inclusion in 2002, the purchase volume of foreign company ratings plummeted instantly.

This directly proves that previous “top-ups” were purely for buying that invisible “VIP ticket”!

When “pay-to-play” investors push out “real strength” investors, stock prices tend to underperform the market long-term. The $13.5 trillion in passive funds worldwide are forced to buy inflated assets, directly diluting your returns.

When the “judge” has the power and is selling tickets, investors need to be extra vigilant.

Paper: Li K, Liu X, Wei S J. Credit Rating Purchases and S&P 500 Index Membership Decisions. Management Science, 2026.