The Test Bench › index_rule

Does S&P MidCap 400 (MDY) actually work?

MARGINAL

Real but small -- not worth what it costs to run.

The claim

S&P MidCap 400 is the index to own — What people actually buy

What we did

Tested against Cap-weight S&P 500, buy & hold, 2004-2026, buy & hold, adjusted total-return.

The result

Result: 10.1 %/yr buy & hold (2004-2026)

+10.1%/yr, Sharpe 0.55, worst drawdown -55% (2008 -36%, 2022 -13%)

Verdict

Mid-caps were supposed to be the 'sweet spot.' They weren't -- Sharpe 0.55, below the plain S&P. The size premium didn't show up.

What the test did and did not do

survivorship-free universe
net of real costs
tested out of sample
point-in-time data
checked for look-ahead

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

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Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.