spin off drift
What it checks
When a company spins off a division, both the parent and the new spin-off tend to outperform their industries for 6-12 months. Index funds dump the new spin-off mechanically, creating a price discount that mean-reverts.
Mechanism
Spun-off subsidiaries outperform their industries by 10-15% in the first year post-separation; parents outperform by 5-8% over the same window (Cusatis-Miles-Woolridge 1993 JFE; McConnell-Ovtchinnikov 2004). Economic story (Krishnaswami-Subramaniam 1999): separation removes information asymmetry and inefficient capital allocation; index funds force-sell the newly-distributed sub-stock, creating non-fundamental supply overhang. Modern replications (Veld-Veld-Merkoulova 2009; Boreiko-Murgia 2017) confirm persistence 12-24 months.
Signal rule
Long for hold_days starting at SEC 8-K Item 1.01/2.01 filing whose event_summary matches spin-off keywords (spin-off, spin off, spinoff, separation, distribution).
Data dependencies
sec_8k_eventsItem-coded 8-K events (1.01 material agreements, 4.02 non-reliance, etc.).
Expected edge
- Paper alpha
- 10-15% year-1 abnormal returns in the 1980s sample; 3-7% modern OOS
- Paper window
- 1965-1988 (in-sample); 1990-2018 OOS replications
Cusatis-Miles-Woolridge 1993: 10-15% abnormal year-1 returns; modern OOS replications 3-7% ann.
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
m and a arbEventWhen a ticker files an 8-K with Item 1.01 (Entry into Material Definitive Agreement) or Item 2.01 (Completion of Acquisition or Disposition), the stock often experiences directional drift over 1-3 months as the deal plays out or the market re-rates the combined entity. We treat this as a coarse-grained M&A play (distinct from arbitrage on announced deals which needs target prices): long any ticker that filed a relevant 8-K Item for 21-63 days post-filing.
index rebalance driftEventWhen 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.
event awareEventThis generator pairs a base trend signal with an earnings-blackout filter: no entries within ±N bars of an earnings announcement, where IV/realized mismatch typically washes out edge. Base signal is a simple 200-day moving-average trend, gated off during earnings-blackout windows of 3 or 7 trading days on either side of the announcement.
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