MSB Trading - 2020, page-15448

I thought people might be interested in a study that examined the effects of index inclusions. Abstract is below and the researchgate link is here:

https://www.researchgate.net/publication/249792732_Index_Effects_Further_Evidence_for_the_SPASX_200

Studies of index effects were first conducted of changes to the S&P500 to assess whether share prices responded to events that did not represent new information as a way of testing the limits of the efficient market hypothesis. This paper examines the price and trading volume impacts of changes in the composition of the S&P/ASX200, since the introduction of the new S&P designed indices in April 2000 up to June 2009. The main contributions of our study are; (i) that index effects of additions to, and deletions from, the S&P/ASX200 are smaller than those for the S&P500, (ii) the positive abnormal returns for additions to the S&P/ASX200 on announcement dates increased on a cumulative basis up to implementation dates, when the returns trended downwards, (iii) the negative abnormal returns for deletions found on announcement dates began to reverse after implementation dates and subsequently became positive, and (iv) these return effects were accompanied by elevated trading volumes.

In a nutshell, what we have observed is consistent with the research. i.e. announcement of index inclusion sees positive returns up until the implementation dates, until the trend returns downwards.

What does this mean for MSB?

Index inclusion announced on 12 June. Opening price was $3.73 and close was $3.60

Implementation date was today. Opening price was $4.00 and close was $3.70

To me that represents a net position of +10c, which I am pretty happy with.

The sky has not fallen in. Evidence matters. What has played out is consistent with the evidence.

The evidence in relation to the effect of MSCs has also been robust. Trust the evidence.

DYOR
Vorzaw