S&P 500 Joiners & Leavers: The Index Curse Fact-Checked

Matthias Runkel · 12/07/2025 · Backtest

We often discuss whether it's worth buying stocks that are newly added to the S&P 500. The thesis: ETFs have to buy on the key date, so the price must rise. I ran the data against this – specifically from the moment the stock is actually in the index.

The Mechanics (Announcement vs. Inclusion)

Announcement Date: S&P announces the inclusion. This is where the front-run begins, traders buy ahead of index tracking. Effective Date (Day 0): The stock is physically included, the large ETF buying volume is already in the market.

Part 1: S&P 500 Joiners

The Big Picture (2004 – today)

Base: 444 Events · Benchmark: SPY

Immediately after inclusion, we see red. On Day 10, joiners are already lagging -0.68% behind SPY on average. Long-term, the excess return collapses permanently: After 200 trading days, the underperformance is -2.69%. Interpretation: The ETF liquidity on Day 0 is used to unload positions. Buyers on the inclusion day are often exit liquidity for arbitrageurs.

Joiner Backtest 2004 to today — Joiner Backtest 2004–today: After Day 0, a clear underperformance becomes apparent.

The Modern Era (since 2021)

Base: 67 Events (last ~4 years)

Since 2021, the effect has been more brutal. On Day 20, we are at -1.75% excess (previously approx. -0.6%). Between Day 40–60, a bull trap occurs, then the trend tips downwards again. After 200 days: -6.75% excess – that's almost 7% worse than the index they were just added to.

Joiner Backtest since 2021: Higher sell-off, more volatility, clear downward trend.

Conclusion & The Edge (Joiners)

Stay away on inclusion day: Buy the Rumor, Sell the News is statistically confirmed.
Short potential: Especially since 2021, selling pressure after inclusion is massive.
The edge is not on the long side, but in the sell-off after Day 0.

Part 2: S&P 500 Absteiger (Leavers)

In Part 1 we see: Joiners fall after inclusion. The question is: Do leavers then have to rise? Old doctrine says: Mean Reversion. The data since 2021, however, shows a structural break.

The Big Picture (2004 – today)

Base: 166 Events (after 200 days) · Benchmark: SPY

Historically, prices stabilize after being kicked out. After 200 days, leavers actually beat the index by +3.79%. For bargain hunters, this was a valid strategy for a long time.

Leaver Backtest 2004 to today — Leaver Backtest 2004–today: Previously there was a rebound effect.

The Modern Era (since 2021)

Base: 40 Events (after 200 days)

Since 2021, the knife keeps falling. After 200 days, leavers are at -9.16% excess. The trend channel is almost linearly downwards. The supposed value play is toxic today.

Leaver Backtest since 2021: The value narrative is broken, the trend remains downwards.

Conclusion & The Edge (Leavers)

Value fishing no longer works since 2021. Many companies are becoming obsolete.
Don’t catch the knife: No discount, but "Toxic Waste".
Short side remains attractive (Day 20 to Day 200).

Nerd Knowledge: Why is the database smaller?

Many departures are acquisitions (M&A). These delistings fall out because 200 post-event days are needed. Additionally, there describe data matching problems (ticker changes, Norgate vs. Polygon). This reduces the quantity, but the downward trend remains robust and statistically clear.

Back to Blog