The reward for inclusion in the S&P 500 is somewhat fleeting, while stocks that are removed keep falling, to the detriment of the smaller-cap indexes they join. Since the start of 2018, the companies added to the S&P 500 lost a median 49 bps on rebalance day but gained 2.4% and 5.3% in the one and three months following inclusion. While the one-month performance trails that index by 50 bps, these stocks have risen 285 bps over the S&P 500 during the subsequent three months. However, on longer, six- and 12-month horizons, stocks added to the index lost an additional 475 bps and 1,230 bps more than the index, respectively.
Removals only outperformed the S&P 500 by 31 bps in the one-month-subsequent window. After that, they lagged by a median 677 bps, 474 bps and 917 bps in the three, six and 12 months to follow. #stocktalk
Removals only outperformed the S&P 500 by 31 bps in the one-month-subsequent window. After that, they lagged by a median 677 bps, 474 bps and 917 bps in the three, six and 12 months to follow. #stocktalk