6 ms·

I guess while the average passive investor doesn't care (in that this reshuffling will happen under them mostly without their knowledge), it seems like a great

by cbanek 6y ago

I guess while the average passive investor doesn't care (in that this reshuffling will happen under them mostly without their knowledge), it seems like a great front-running opportunity for the banks and active managers. A lot of money gets put into the S&P 500 and it must create quite a bit of buy-side demand.

kasey_junk 6y ago
Just so we are clear, front-running means something very specific in trading and active managers preparing for index changed isn’t it. In fact this sort of change has long been priced into the market, it won’t change prices much at all when it happens.
- cbanek 6y ago
  Ah, the great "it's priced in" - but is it really? I guess nobody can really know, unless you're one of those that says the market is always correct. And yes, there's front running an individual trade, but I was thinking a much longer timeframe, although I don't know what the right word for it would be. Would that be considered momentum? Pre-momentum?
  - srl 6y ago
    Well, you can know, by looking at whether or not there's a change in stock price upon announcement of inclusion in an index, right? https://www.nber.org/digest/nov13/w19290.html https://www.nber.org/digest/nov13/w19290.html It appears that it's not entirely priced in.
  - kasey_junk 6y ago
    No idea what the right word for what you are saying is. But it’s not front-running. Using front-running here would be similar to if I described a social engineering hack as a “zero-day”. Except worse as front running is frequently legally defined by groups like the sec & finra.
    - deleted 6y ago
      [deleted]
anonu 6y ago
The index rebalance trade is as old as time... Nothing new. Arbitrageurs take risk to provide liquidity on the rebalance day. You need to get paid for that risk. So they do the market a service.

6 ms·

I guess while the average passive investor doesn't care (in that this reshuffling will happen under them mostly without their knowledge), it seems like a great

by cbanek 6y ago

kasey_junk 6y ago
Just so we are clear, front-running means something very specific in trading and active managers preparing for index changed isn’t it. In fact this sort of change has long been priced into the market, it won’t change prices much at all when it happens.
- cbanek 6y ago
  Ah, the great "it's priced in" - but is it really? I guess nobody can really know, unless you're one of those that says the market is always correct. And yes, there's front running an individual trade, but I was thinking a much longer timeframe, although I don't know what the right word for it would be. Would that be considered momentum? Pre-momentum?
  - srl 6y ago
    Well, you can know, by looking at whether or not there's a change in stock price upon announcement of inclusion in an index, right? https://www.nber.org/digest/nov13/w19290.html https://www.nber.org/digest/nov13/w19290.html It appears that it's not entirely priced in.
  - kasey_junk 6y ago
    No idea what the right word for what you are saying is. But it’s not front-running. Using front-running here would be similar to if I described a social engineering hack as a “zero-day”. Except worse as front running is frequently legally defined by groups like the sec & finra.
    - deleted 6y ago
      [deleted]
anonu 6y ago
The index rebalance trade is as old as time... Nothing new. Arbitrageurs take risk to provide liquidity on the rebalance day. You need to get paid for that risk. So they do the market a service.