Stocks removed from an index face forced selling and depressed valuations in the short term, but over longer periods they often outperform because if they remain outside the index they are purchased at a permanent discount to equivalent companies inside the index, and if they are eventually reincluded they produce significant gains from the step-up.
causalpending
Speaker
Seth KlarmanEvidence Quote
“when it's off the exchange and out of an index there might be a lot of people that have to sell it...stock price just falls into some kind of black hole...if it's ever included in the index now you have significant gain from the step up”
Created: 8/12/2026, 5:57:12 PM
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