Index funds need to buy additions and sell deletions when MSCI reshuffles its indices. The question is: when exactly do they trade? Theory says they should spread execution to minimize impact. Reality says they cram everything into the closing auction on ED-1 to hit the closing price and minimize tracking error. The paper quantifies this rigidity and asks whether it creates exploitable patterns.
Half Your Index Rebalance Happens In The Last…
Index funds need to buy additions and sell deletions when MSCI reshuffles its indices. The question is: when exactly do they trade? Theory says they should spread execution to minimize impact. Reality says they cram everything into the closing auction on ED-1 to hit the closing price and minimize tracking error. The paper quantifies this rigidity and asks whether it creates exploitable patterns.