Wednesday, June 28, 2017

Russell rebalance

Russell will have a big impact today to reconstitute its stocks in the indexes.

From my experiences, the 1000 will be stronger at the expense of 2000 and 2000 will be stronger than 3000 at the expense of 3000. It is the results of promotions and demotions.


The stocks delisted from 3000 are usually losers and even a bigger losers for the coming months.
I did some research before. The promoted stocks (after the date of promotion) are doing better than the average in the coming year. With a historical database it is quite easy to test past performances as below.


It is even more profitable if one can determine which stocks are going to be promoted. Not a easy task.


For example in one year ago, find the stocks that were not in the index (such as 1000) before the reconstitution and they were in the index after, check the performance one year later.
However, today the market is risky, so do not bet your farm on it.

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