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| Format: | Preprint |
| Published: |
2026
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2603.19380 |
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| _version_ | 1866915876275486720 |
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| author | Ranse, Harjot Singh |
| author_facet | Ranse, Harjot Singh |
| contents | This study quantifies survivorship bias in India's NIFTY Smallcap 250 index using a dataset of 1,437 stocks over nine years (2016-2025). By reconstructing historical index composition through market capitalization ranking and comparing equal-weight portfolios of current constituents versus all historical members, I show that survivor-only backtesting overstates annual returns by 4.94 percentage points (23.3%) and Sharpe ratios by 0.097 (9.1%). The analysis reveals an 82.5% turnover rate, including delisted (16.1%), graduated (33.1%), and demoted stocks (33.2%), with all categories contributing to bias. Using bhavcopy data that includes delisted securities, the reconstruction achieves 100% accuracy for current constituents and an estimated 85-90% accuracy historically. These findings highlight that survivorship bias is materially larger in emerging market small-caps and that using only current index members can significantly overstate strategy performance. Briefly, the methodology reconstructs historical index membership using a price-volume-based ranking approach to enable survivor-free backtesting. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_19380 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Survivorship Bias in Emerging Market Small-Cap Indices: Evidence from India's NIFTY Smallcap 250 Ranse, Harjot Singh Statistical Finance This study quantifies survivorship bias in India's NIFTY Smallcap 250 index using a dataset of 1,437 stocks over nine years (2016-2025). By reconstructing historical index composition through market capitalization ranking and comparing equal-weight portfolios of current constituents versus all historical members, I show that survivor-only backtesting overstates annual returns by 4.94 percentage points (23.3%) and Sharpe ratios by 0.097 (9.1%). The analysis reveals an 82.5% turnover rate, including delisted (16.1%), graduated (33.1%), and demoted stocks (33.2%), with all categories contributing to bias. Using bhavcopy data that includes delisted securities, the reconstruction achieves 100% accuracy for current constituents and an estimated 85-90% accuracy historically. These findings highlight that survivorship bias is materially larger in emerging market small-caps and that using only current index members can significantly overstate strategy performance. Briefly, the methodology reconstructs historical index membership using a price-volume-based ranking approach to enable survivor-free backtesting. |
| title | Survivorship Bias in Emerging Market Small-Cap Indices: Evidence from India's NIFTY Smallcap 250 |
| topic | Statistical Finance |
| url | https://arxiv.org/abs/2603.19380 |