The index inclusion effect: US vs Europe and Asia
By EtfWatch editorial · Published · Data updated
The "index inclusion effect" — a stock rising when it is added to a major benchmark — is usually studied on the S&P 500. EtfWatch tracks eight indexes across three regions, which makes it possible to put the US numbers next to Europe and Asia using one consistent method. This article compares all 43 additions in the register.
The eight indexes
In the US we track the S&P 500, S&P MidCap 400, S&P SmallCap 600 and the Nasdaq-100. In Europe, the FTSE 100 in London and the DAX 40 in Frankfurt. In Asia, the Nikkei 225 in Tokyo and the Hang Seng in Hong Kong. They differ in ways that plausibly shape the inclusion effect: the S&P indexes are picked by a committee with profitability rules, the Nasdaq-100 is a rules-based ranking of the largest non-financial Nasdaq listings, the FTSE 100 and DAX follow published size-ranking rules with buffer zones, the Nikkei 225 is price-weighted, and the Hang Seng uses a committee-reviewed free-float methodology.
Passive ownership also differs. US index funds hold a very large share of their benchmarks' market value, so the forced buying around a US addition is proportionally bigger. In Europe and Asia, passive funds are a smaller part of trading, which traditionally meant a weaker — though not absent — inclusion effect.
Index by index
| Index | Entries | Median run-up | Avg 1M | Median 1M | Avg 3M | Avg 1Y | 1Y vs index |
|---|---|---|---|---|---|---|---|
| S&P 500 | 28 | +16.9% | +0.5% | +2.2% | +7.3% | +27.6% | +11.3% |
| Nasdaq-100 | 15 | +12.2% | -2.2% | +0.8% | -1.3% | +3.6% | -17.0% |
| S&P MidCap 400 | 0 | — | — | — | — | — | — |
| S&P SmallCap 600 | 0 | — | — | — | — | — | — |
| FTSE 100 | 0 | — | — | — | — | — | — |
| DAX 40 | 0 | — | — | — | — | — | — |
| Nikkei 225 | 0 | — | — | — | — | — | — |
| Hang Seng | 0 | — | — | — | — | — | — |
Among indexes with at least three measured one-month results, the S&P 500 had the strongest average month after inclusion (+0.5% across 28 entries) and the Nasdaq-100 the weakest (-2.2% across 14). The gap between them says as much about how each market performed over the sample period as it does about the inclusion effect itself, which is why the final column subtracts each index's own move.
S&P MidCap 400, S&P SmallCap 600, FTSE 100, DAX 40, Nikkei 225, Hang Seng have no additions recorded in the register yet, so they are shown with blanks rather than estimated figures.
Region by region
| Region | Entries | Median run-up | Avg 1M | Median 1M | Avg 3M | Avg 1Y | 1Y vs index |
|---|---|---|---|---|---|---|---|
| US | 43 | +16.0% | -0.4% | +1.9% | +4.6% | +21.0% | +3.6% |
| Europe | 0 | — | — | — | — | — | — |
| Asia | 0 | — | — | — | — | — | — |
Pooling by region, US additions (43 entries) showed a median run-up of +16.0% and an average first month of -0.4%. European additions (0 entries) showed not measurable and not measurable. Asian additions (0 entries) showed not measurable and not measurable. Over a year, the averages relative to each stock's own index were +3.6% for the US, not measurable for Europe and not measurable for Asia, where completed windows exist.
The US pool is much larger than the others, so its averages are the most stable. A European or Asian figure built on a few dozen — or a few — entries can flip sign with one new addition. The run-up columns are especially thin outside the US because many international rows lack a distinct recorded announcement date, and we exclude those rather than assume one.
What could explain the differences
Three structural factors are worth keeping in mind when reading the tables. First, predictability: rules-based indexes such as the FTSE 100 or the Nasdaq-100 let traders anticipate changes well before the official announcement, which can move the price earlier than our 30-day run-up window. Second, the size of the passive base: the larger the share of a benchmark held by index funds, the bigger the forced trade. Third, migration: many additions to the S&P 500 or the FTSE 100 come from a sister index already tracked by funds, which nets down the new demand.
None of these factors can be proven from our data alone; the register shows what happened, not why. Market conditions in each region over the same months matter at least as much, which is the reason the benchmark-relative column is the fairest single comparison.
Explore each index
- S&P 500 hub · insights
- Nasdaq-100 hub · insights
- S&P MidCap 400 hub · insights
- S&P SmallCap 600 hub · insights
- FTSE 100 hub · insights
- DAX 40 hub · insights
- Nikkei 225 hub · insights
- Hang Seng hub · insights
- All indexes combined
Related guides: Does S&P 500 inclusion still pay? and S&P 600 → 400 → 500 migrations.
Methodology
Every addition is measured against the index it joined, using that index's own benchmark levels, so a FTSE 100 stock is compared with the FTSE 100 and a Nikkei stock with the Nikkei. Returns are in local currency. Regions pool the additions of their indexes; they are not weighted by market size.
Returns are simple price changes measured from the effective-date close (offset 0) to the close nearest each window: 1M = 30, 3M = 90 and 1Y = 365 calendar days. "Vs index" subtracts the benchmark's change over the same window. Run-up is the move from 30 days before the effective close to that close, and only counts entries with a genuinely recorded announcement date. Windows that have not elapsed, or lack a usable close, are left out rather than treated as zero. Full details are on the About & methodology page.
Historical data only — not investment advice.