ETF flows#290tier 2experimental liveNew

`index inclusion drift`

cadence: Monthlydata: mediumlong only

2004

Chen, H., Noronha, G., & Singal, V. (2004). "The price response to S&P 500 index additions and deletions: evidence of asymmetry and a new explanation." Journal of Finance 59(4), 1901-1929.

Read the paper →

What it checks

When a stock first shows up in a broad index ETF, it tends to drift up 3-5% over the next month as funds rebalance.

Mechanism

Chen-Noronha-Singal 2004 documents +3-5% drift over 30-45 days after index addition. Effect is asymmetric - additions drift up persistently. We detect inclusion via first-appearance in SPY/IVV/VOO/IWB/ITOT N-PORT panel.

No production champion data for this family yet. Stats appear once the discovery pipeline promotes at least one strategy with this family tag, or once a multi-family blend that includes it earns a champion slot.

Signal rule

New constituent in SPY/IVV/VOO/IWB/ITOT/DIA panel (absent in prior snapshot) -> LONG 20/40/60d.

Data dependencies

daily_prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
etf_holdings
ETF holdings and N-PORT constituent-weight panel.

Expected edge

Paper alpha: +3-5% over 30-45d (Chen-Noronha-Singal 2004)
Paper window: T+1 to T+60d

Chen-Noronha-Singal 2004: +3-5% drift over 30-45d post-announcement.

Example tickers where this is likely to fire

NVDA TSLA AMZN META

Illustrative only — the signal fires based on the live data, not a fixed list.

Related families

index rebalance driftEvent

When a stock is added to the S&P 500, index funds must buy it on the effective date. The announcement (typically 3-5 trading days before) triggers a front-running rally averaging +8% by effective date. Deletions show a symmetric -4% drop. Both effects partially reverse in the 20 days after effective date. We trade adds long from (eff_date − 4d) through eff_date and short the reversal for 10-21d after; deletions get a 5d-lagged long for 21-63d on the overdone fade.

etf creation redemption flowETF flows

ETF creation-unit flows transmit non-fundamental demand into constituents (Petajisto 2017). Ben-David et al 2018 show flow-driven ETF demand predicts short-horizon drift. We proxy flow via delta shares-held across N-PORT snapshots.

etf comembership contagionETF flows

Aggregate ETF constituent-weight changes proxy flow pressure and common-ownership contagion. Stocks receiving broad ETF weight increases are held long.

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index inclusion drift