The Six Rules of Russell Indexes Rules matter. In 1984, a team of financial analysts and consultants at Russell recognized that the existing U.S. equity indexes did not represent the investments that most managers were making. The team developed rules that would result in indexes that better reflected how managers actually invested and better measure the performance of the universe of investable stocks. Over 20 years later, these rules still govern the Russell Index design worldwide: Rank each company in the investable universe according to its total market capitalization. Russell uses market capitalization levels as the primary tool to determine where a company belongs in its indexes. Adjust each company's capitalization ranking to eliminate closely held shares that aren't likely to be traded. Using float adjustment methodology create index benchmarks that most accurately reflect the market. Create indexes that match manager's behavior and include all the securities that investment managers actually buy. That's why Russell indexes represent more than 98% of the global equity market. Objectively allow the market to determine the index composition according to clear, published rules. Russell relies on the market to determine which companies are included, not on a subjective vote of a selection committee. Update indexes on a regular basis. Accurate reflection of the market is impossible without timely updates. Russell reconstitutes its indexes annually, re-ranking all stocks based on their updated market capitalization. Make indexes work as financial tools. The Russell Indexes are used as the basis for many investment products including ETFs, futures and optons. Better rules for better indexes. Russell's disciplined approach in index methodology creates benchmarks designed to assist investors in making better investment decisions.			Printer friendly version of this page

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