12 May, MSCI, an analytical company, announced the inclusion of Ozon retailer depositary receipts (MOEX: OZONE) to the MSCI Russia index. This index now includes 24 issuer. The actual rebalancing of MSCI Russia will take place 27 May.
Is considered, that the company's shares after being included in the index should rise. There are three stages, when can it happen:
- Before the announcement of inclusion. Insiders with access to information can buy shares in advance, driving up their prices.
- After the announcement of inclusion. Speculative growth. Stocks are bought by news-trading investors. Their argument: index funds will be forced to buy shares of the company, and this stimulates the growth of quotations.
- After the actual rebalancing. Index funds buy stocks of an indexed company in large volumes, the price is rising.
Sounds like a plan for a retail investor, But there are studies that disprove this theory..
A staff member at the University of Pennsylvania studied the price dynamics of stocks after they were included in S&P 500 between 1990 and 2015. Its conclusion: until the early 2000s, indexed stocks actually outperformed the market by a few percent. Now, according to the author, markets have become more efficient, a inclusion in the index does not significantly affect the share price.
The authors of another study came to a similar conclusion.: in the last decade, market inefficiencies, associated with the inclusion of the company in S&P 500, almost disappeared.
In another paper, we examined the dynamics of the share price of Central and Eastern Europe. According to the authors, stocks have an increased return on the day of the announcement of inclusion in the index, but in three weeks they show the dynamics worse than the market. Study authors recommend sticking to a "buy and hold" strategy, since it is more efficient.
12 May c 12:55 Ozon depositary receipts rise by 1% after the start of trading, but lose 10% with 21 April, when the analysts of VTB Capital announced the possible inclusion of the company in MSCI Russia.
