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Hysteresis (why a list does not churn)

The rule that a current member keeps its place while its rank stays within 15 even though only 10 are published — a deliberate gap that stops the same two companies swapping places every period on differences too small to mean anything.

A list of 10 chosen by taking the top 10 every period would have a hidden problem: the companies ranked 10 and 11 are usually separated by a fraction of a point, well inside the noise of the underlying data, so they would trade places repeatedly and each swap would be published as though something had happened. The fix is the ordinary engineering answer to a threshold that flickers — make the level for staying different from the level for entering. Here a company already in the list keeps its place while its rank is 15 or better, while a company outside it must reach the top 10 to get in.

The word comes from physics, where it names a system whose state depends on how it got there and not only on where it is now; a thermostat that switches the heating on at one temperature and off at a slightly higher one is the everyday case. A Top-10 list behaves the same way on purpose: two companies with identical scores can be in different states, one inside the list and one outside, because one of them was already there. That is not an inconsistency in the ranking — it is the mechanism doing its job.

The cost is worth being explicit about, since it is a real one. A company ranked between 11 and 15 is being published in a list of 10 while not being in the top 10 that day, and a slightly better-ranked company outside is being kept out. The trade is churn for legibility: it buys a membership record in which a change means the rank moved far enough to be worth reporting. Every hold is written to the ledger alongside the entries and exits, so the reader can see that a company stayed and at what rank rather than having to assume it.

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Every rebalance, with reasons →

Related terms

  • The Long-term Score — A 0–100 number that is the weighted average of a company’s percentile ranks on six pillars — profitability 20%, growth 20%, financial health 15%, valuation 15%, shareholder return 10%, long-term trend 20% — and the thing the Long-term 10 is sorted by. It is a published formula and its output, not a recommendation.
  • The Short-term Score — A 0–100 weighted average of five technical pillars — trend 25%, momentum 20%, setup 20%, volume and participation 15%, catalysts 20% — describing where a share stands on the tape today. It describes past price behaviour; it does not forecast the next move.
  • Percentile rank — Where one company stands in a field, expressed from 0 to 100 rather than in the metric’s own units — the device that lets a margin, a growth rate and a valuation multiple be averaged into one score without any of them dominating.
  • Rebalance — The scheduled moment when a list’s membership is allowed to change — rebalanced on the first trading day of each month for the Long-term 10, rebalanced every Monday for the Short-term 10. Scores move every night; membership only moves on the calendar.
  • Equal weight — Treating every holding in a list as the same size, so a company’s influence on the result comes from its own move and not from how large the company is — the basis on which the Top-10 lists are tracked against the market.

See more terms in the stocks-llm glossary.

Informational only — NOT financial advice. This is an educational definition, not a recommendation to buy or sell anything. Metrics on stocks-llm are delayed data and may be missing or stale. Always verify information independently and consult a qualified financial professional before making any investment decision.

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Informational only — NOT financial advice.

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