Index membership
Which companies were actually inside an index on each past date.
An index such as the five hundred largest US companies is a club with a revolving door. Every year some members leave, because they shrank, were bought or went bust, and new ones come in, often right after a strong run. The list you can look up today is only tonight's guest list. Index membership, kept date by date, is the full register: who was inside on each day in the past.
A test that applies today's list to the past makes two mistakes without meaning to. It leaves out the companies that failed along the way, so history looks safer than it was. And it holds today's winners years before they joined, buying them in advance of the very success that got them in. Both mistakes flatter the result, and neither one shows on the chart.
The logbook's earnings entry rebuilt the membership date by date across thirty years, including the companies that later went bust or were bought out, before it counted a single report. It is the first thing to ask of any test run on "the index": which members, on which day?
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Where this word comes up
First needed in the log entry H-042 · The post-earnings bounce did not survive our cost assumptions.
From the same entry: Backtest, Basis point, Buy the dip, Correction for looking twice, Gross edge, Large caps, Net return, Post-earnings drift, Pre-registration, Published anomaly, Quarterly results, Real costs, RSI indicator, Short side, Survivors only, Terciles.