Mark Hulbert: This can’t-miss stock trading strategy has disappeared — and isn’t coming back

by | Dec 17, 2022 | Stock Market

The six stocks that are being added to the Nasdaq 100 index
NDX,
-0.89%
barely rose, on average, after their additions were announced. Nasdaq Inc. announced the change after the close of trading on Dec. 9. From their closing prices that day (before the announcement) to their opening prices on Monday (three days later), the six stocks added to the NDX declined a fraction of a percent on average at the open.

(Note that this period over which I calculated their return is the appropriate one for measuring the impact of Nasdaq’s announcement. Later in Monday’s trading session, as the broad market staged a sizeable rally, so did some of these stocks slated to be added to the NDX. But it’s not clear that we can attribute their post-open gains to Nasdaq’s announcement last Friday.) It’s a big surprise that these stocks didn’t do a lot better. In past years, index additions tended to experience a sizeable jump in the immediate wake of their additions being announced. Perhaps even more surprising is that the stocks that Nasdaq is dumping from the NDX barely declined at the open — just 31 basis points, or 0.31%, on average. It used to be that stocks dumped from a major index suffered significantly more than the added stocks gained. Yet no one should be surprised that these stocks barely reacted, according to a new study from two Harvard professors. T …

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