Russell Reconstitution Drift
In plain terms
Once a year (late June), small-cap stocks that have grown into mid-cap territory get promoted from the Russell 2000 to the Russell 1000. Those promoted names tend to drift up for the next 2-3 months as the largest index-fund flows re-balance. NOTE: requires Russell-named rows in index_rebalance_events; family is a no-op until those are ingested.
How it works
Russell rebalances annually (effective late-June). Stocks promoted from Russell 2000 to Russell 1000 experience persistent positive drift in the 60-90 days post reconstitution — Madhavan documents +2-4% abnormal return on the promoted cohort as long-only index-fund flow re-balances toward the now-larger-cap exposure.
Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- Index rebalance events
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
- Reported return
- +2-4% over 60-90d
- Tested over
- T+1 to T+90d
+2-4% over 60-90d on R2000→R1000 promotion cohort (Madhavan 2003).
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
When a stock is newly added to the S&P 500, it tends to keep drifting up for a month or two after the official inclusion date — index-tilted funds keep buying, and analyst coverage expands. Go long for 30-60 days post-inclusion.
When a stock is added to the S&P 500, index funds must buy it on the effective date — front-runners earn +8% by then. Symmetric -4% on deletions.
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.
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