Insights

When a big company joins the S&P 500, index funds are genuinely forced by the rules to buy it. The "inclusion premium" that used to come with that, though, has all but vanished over the past two decades. Drawing on the membership rules of the three major index families, the mechanical buying from $20 trillion in passive money, and first-hand academic evidence on the "disappearing index effect," this piece asks what a spot in an index is really worth. The verdict: passive demand equals roughly 7–8% of a new member's float and is genuinely measurable, but the excess return from announcement to effective date has fallen from 7.4% in the 1990s to 0.3% over the last decade. SpaceX cannot get into the S&P 500 and is about 15 trading days from the Nasdaq-100; its rock-bottom 4.25% float is the real variable.