Research

How To Trade Index Rebalancing?

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Algo Research Team

Market | Dec 11, 2023 | Views: 206

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Key Summary:

  • Why monitor index rebalancing?
  • How to trade around index rebalancing?
  • Exit liquidity for stocks added to index

A big part of the theme this year is to find stocks that would potentially be included/added in the index rebalancing such as MSCI or FTSE for global indices or LQ45 and IDX30 for local. The most watched and influential (in terms of share price movement) index is the MSCI where stocks such as AMMN, GOTO and ARTO have been included or excluded in 2023.


In this research, we analyzed the performance of the stocks across 4 indices which are MSCI, FTSE, LQ45 and IDX30 from 2018-2023 with +350 total data sets and found that generally those that were deleted (exclusion) outperformed 3-months or 1-month after rebalancing the date, while those that were added (inclusion) outperformed 3-months or 1-month before the date. The trends were most consistent in MSCI and IDX30 while mixed in FTSE and LQ45.

How was our research?

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