S&P Game has been around since they changed the rules in 1988 and grew stronger in the 90's as huge amounts of money became indexed. By the mid 90's the first research papers started popping up in all the financial journals and that is when and why I became a trader. I made millions out of thin air in my mid 20's. Just amazing. Now it is more of a gaming the gamers game, ha! and most of the opportunities are smaller or lie in obscure data that will allow you to buy the small daily or quarterly rebals before they are announced on index alert. Russell rebal has seen significant declines in profitability also. I have traded adds/deletes in many countries/indices with success and although there is significant opportunity in some markets/indices, the competition is tightening everywhere. Soon someone will be selling the system or writing a book about it and then you will know it has become as shitty as pairs trading, which cracks me up because it worked great in the 80's and early 90's when not everyone had the technology to analyze thousands of stocks and then trade large baskets. In my opinion, you are looking at the tail end of the S&P game. I put my money where my mouth is in 2003 and moved on to greener pastures (developed/found a new strategy by combing the financial jopurnals which I have been reading avidly).
S&P Rebalance Friday???
- Thread starter VT96
- Start date
Joe, indirect question... could you mention which financial journals should be read - i read derivatives strategy... ?
cj
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My understanding is that the reason this edge has mostly dwindled down to small portions is because the managers themselves read the same journals and have come up with counter strategies to buying early in small portions instead of the MOC on the reconstitution date. The reason they did not want to do this before was because they were afraid of the tracking error, which on size trades adds up.
nitro
nitro
edgehunter - I only subscribe to the journal of finance and the journal of financial research, but there are hundreds of financial journals. Here is a link to them all;
http://www.cob.ohio-state.edu/fin/journal/jofsites.htm
there are also free databases that allow you to search massive amounts of research papers for free articles, what you can't find here for free is usually available on the proffessor's websites.
http://papers.ssrn.com/sol3/DisplayAbstractSearch.cfm
qazmax - it is a market cap weighted index so changes in capitalization alone don't have much effect, compared to new share pricings, stock buybacks, acquisitions, indexed dollars, etc.
Nitro - I am not sure where you got this info, but here is my best guestimation. Index funds started gaming the adds about the time they stopped being so profitable. It would be my best guess now that index funds could all place MOC orders and it would have little effect upon the security being added. Everyone and his retarded brother in law are gaming these adds/deletes now and it really has become a game of gaming the gamers. I do believe that some funds are gaming along with eveyone else, but I don't think they caught on when the profits were still enormous.
http://www.cob.ohio-state.edu/fin/journal/jofsites.htm
there are also free databases that allow you to search massive amounts of research papers for free articles, what you can't find here for free is usually available on the proffessor's websites.
http://papers.ssrn.com/sol3/DisplayAbstractSearch.cfm
qazmax - it is a market cap weighted index so changes in capitalization alone don't have much effect, compared to new share pricings, stock buybacks, acquisitions, indexed dollars, etc.
Nitro - I am not sure where you got this info, but here is my best guestimation. Index funds started gaming the adds about the time they stopped being so profitable. It would be my best guess now that index funds could all place MOC orders and it would have little effect upon the security being added. Everyone and his retarded brother in law are gaming these adds/deletes now and it really has become a game of gaming the gamers. I do believe that some funds are gaming along with eveyone else, but I don't think they caught on when the profits were still enormous.
Oh yeah Nitro!!! I made my biggest one day take ever on that rebalance (500K) discussed in the first paper. I actually read that paper (used Quantex for a while), but I was there and made the trade and man oh man did those stocks pop after the close. I have done a lot of very cool strategies over the years if you ever want to chat (some of them were discussed in other ITG papers). Goldman wrote a paper in 2002 saying that all of their info showed S&P rebal players net losers since 2001. I managed to eke out a couple extra years, probably because I knew more about S&P rebals than the PhD's writing the papers (it's all good in theory, ha). I still don't think the index funds got there till the end of the game, but it really is a chicken and egg argument because obviously if/when they did get there then it was over anyhow. I think a lot of funds plowed in around the time just before the market crashed and then got their heads handed to them as the watched adds/ deletes drop 50% during the announcement period while the market began it's downward spiral. I think the funds began gaming it earnestly later on, after journalists/paper writers started bashing them for being stupid, ha! The bottom line (and the only thing that matters) is that "it aint what it use to be". This is also the only reason I have discussed this at all. I will gladly discuss anything that is not currently filling my pockets with cash.