There is also a study on the impact on additions and deletions to the index. June 26th is when all mutual funds will rebalance their positions to match the changes in the index. This increases volumes and seems to increase stock prices, especially for stocks that are not very liquid.
After June 26th additions have higher average volumes due to the larger shareholder base.
Some Hedge funds may try to game the reconstruction and make some money going long on the additions and short on the deletions.
Last year's cut off was at 167M market cap for US stocks. with the russell down 30% the cut off may be down to 120M or lower.
Are there any good websites with stock screening capabilities? would be nice to have a list of possible additions and deletions.
I've tried to play this game for several years and lost a fair amt of money in so doing.
There's plenty of papers discussing the impact, but this is a classic case of an "efficient market" working its magic.
That is, folks with brains and software to go with their (big) bux did the analysis - as a guess - 6-9 months ago and placed their bets. IN FACT, since this is akin to arbitrage for really sophisticated people, if they sensed or sense that the "bounce" has been baked in, they go from long to short (if they WERE long at the time).
Plus, you have wildcards like insiders "unwinding," especially this year. Imagine you're a BMRC director with 15,000 shares (or a key employee or relative of same) - we all know that it would take 6 weeks to dribble that out if you didn't want your last few lots to go at $22 (on a hypothetical "sell 15K at the market" order).... Now, of course, you can "expect to" sell into strength.
There may be opportunities here - but I'm guessing that the smartest non-wired play would be "straddles" (probably 5 or fewer of these stocks HAVE listed options), because buying equal amounts of puts and calls MIGHT let you profit, given that many of these stocks will have a 10% move [UP OR DOWN!!] that day. (Of course, the options may have prices and spreads that reflect this!)
Actually, there is one way to take advantage of this - just w.r.t. BMRC - buy on weakness, before or after the rebalancing, because there should be some "decent liquidity" for a change. A year ago, on a $25-26 quote, you were more than likely buying from a market maker and immediately "down" 4%.