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http://www.fusioninvesting.com/2011/03/does-index-inclusion-lead-to-higher-share-prices/

I often see this incorrect view put forward, so am posting this here as a to be expanded work in progress.

If you think about it then simply buying any companies that have been included in an index would result in market out-performance, because they the stock has to go up because indexers have to buy them. People’s next thought is that indexers buy ahead of the change date. Well then same thought goes, buying as soon as announced would lead to out-performance. Or one step further buying on anticipation of the announcement would lead to out-performance.

The reality is index funds do not buy every share in an index. There is absolutely no need for them to do so to mirror the performance of the index. Indexers buy a representative sample of the index. This generally comprises all the top companies and a selection of mid/smaller companies by industry.

There are also small cap fund managers who don’t wish to own stocks once they are included in an index.