DP14234 An Improved Method to Predict Assignment of Stocks into Russell Indexes

Author(s): Itzhak Ben-David, Francesco Franzoni, Rabih Moussawi
Publication Date: December 2019
Keyword(s): ETFs, institutional investors, Russell, volatility
JEL(s): G12, G14, G15
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14234

A growing literature uses the Russell 1000/2000 reconstitution event as an identification strategy to investigate corporate finance and asset pricing questions. To implement this identification strategy, researchers need to approximate the ranking variable used to assign stocks to indexes. We develop a procedure that predicts assignment to the Russell 1000/2000 with significant improvements relative to previous approaches. We apply this methodology to extend the tests in Ben-David, Franzoni, and Moussawi (2018).