russell reconstitution drift
What it checks
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.
Mechanism
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.
Signal rule
Add to Russell 1000 paired with remove from Russell 2000 within 30 calendar days (or sole add when R2000 rows not tracked) -> LONG at T+1; hold 60/90 trading days.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
index_rebalance_eventsWorker data table — see services/worker schema.
Expected edge
- Paper alpha
- +2-4% over 60-90d
- Paper window
- 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
sp500 inclusion driftEvent-DrivenNewly-included S&P 500 names enjoy persistent positive drift well past the index-fund mechanical buying window. Chen-Noronha-Singal document +1-2% gradual drift over 30-60 days post-effective as discretionary index-tilted funds rebalance and the new constituent earns analyst coverage. Distinct from the existing index_rebalance_drift family which captures the announcement-to-effective short-term front-run + reversal.
index rebalance driftEvent-DrivenWhen 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.
index inclusion driftInsider & FlowChen-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.
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