Russell Indexes

Russell Global Indexes Construction & methodology The Russell Global Index represents the investable global equity market and its segments comprehensively. It consists of more than 10,000 securities in 47 countries and offers over 300 key subindexes. Consistent with the design of the family of Russell U.S. Equity Indexes, it is constructed using float-adjusted market capitalization weights and represents 98% of the investable global equity market. Download the complete document Russell Global Indexes construction & methodology (PDF) Purpose Offers investors a complete global equity market performance benchmark Serves as a proxy for asset allocation purposes Provides a replicable vehicle for passive investment portfolios with global exposures Construction of the investable equity universe Screen companies globally by total market capitalization Apply minimum size and investability standards, and liquidity screens in order to determine a security's index eligibility Determining index membership Allocate securities to their home countries (each security is included in one, and only one, country) Take the top 98% of companies in the U.S. (Russell 3000® Index) and the top 98% of companies in the rest of the world Derive each security's weight in the index using float-adjusted market capitalization Determining style index membership Rank each stock in the Russell Global Large Cap Index and the Russell Global Small Cap Index by respective variables to determine Valuation (Growth/Value) or Stability (Defensive/Dynamic) styles. Valuation style variables: book-to-price ratio to represent value and I/B/E/S forecast medium-term growth and historical sales per share growth to represent growth. Stability style variables: EPS variability, ROA, and debt-to-equity to represent quality and total return volatility over two time periods to represent volatility. Combine variables to create a composite value score (CVS) for each stock. To ensure that turnover remains low, Valuation style implements a band of +/- .10 at the CVS level to prevent the occurrence of smaller, less meaningful movements Rank the stocks by their CVS and apply a non-linear probability algorithm to the distribution to determine style membership weights. Roughly 70% are classified as all value or all growth and 30% are weighted proportionately to both value & growth. Subdivision of global index Modular index construction supports a broad spectrum of sub-indexes based on country, region, sector, size or any other customized needs Combine macroeconomic and market criteria to create robust classification methodologies for developed and emerging markets countries Global-relative approach to index construction results in a classification system that assigns capitalization tiers (small, mid, large) to all companies regardless of domicile, industry or sector Exclusions Unavailable shares that are restricted by corporate governance or held by strategic investors Securities in countries that do not allow foreign investment Fixed income-like securities Warrants and rights, trust receipts and royalty trusts, limited liability companies, bulletin board, pink sheet stocks (some global exceptions occur), closed-end investment companies, limited partnerships, exchange traded funds Securities with a market capitalization of under $1,000,000 USD Securities with an average daily trading volume of less than $150,000 USD Qualified Foreign Institutional Investor (QFII) shares in China Special rules in individual countries Rules are designed to reflect country specific regulations as well as the characteristics of local capital markets China and Hong Kong Special Administrative Region are both recognized as different investment universes Russell recognizes shares represented by special depository receipts in countries such as Russia, Israel, the Philippines and others as investable. These underlying shares are added back to free float after the foreign ownership limit adjustment has been applied. Market prices are used to calculate performance Maintenance Daily adjustments for stock splits, dividends and de-listings Month-end adjustment of stock buybacks and equity offerings Quarterly review of IPO additions Annual reconstitution of index This summary is meant to be an overview of our global index methodology and does not contain complete information about the construction and methodology of the Russell Global Indexes. For a complete and controlling description of the Russell Global Indexes methodology, please consult the comprehensive Russell Global Indexes construction & methodology document (PDF).			Russell Indexes families Russell Global Indexes    -- Global Index    -- Global ex-U.S. Index    -- Global Large Cap Index    -- Global Small Cap Index    -- Developed Index    -- Emerging Markets Index Russell U.S. Indexes    -- 1000 Index    -- 2000 Index    -- 3000 Index    -- Microcap Index Barclays-Russell LDI Index Series BATS Chi-X Europe Russell Index Series Russell-Axioma Factor Indexes    -- Factor Indexes (Long-Only) Russell Dividend Achievers Russell Equal Weight Indexes Russell European Indexes Russell Frontier Indexes Russell Fundamental Index Series Russell Geographic Exposure Index Series Russell High Dividend Yield Index Series Russell High Efficiency Defensive Indexes Russell-IdealRatings Islamic Indexes Russell/Nomura Indexes Russell Stability Indexes Russell Volatility Control Indexes Custom Indexes Subscribe to Russell Indexes Membership lists Index definitions Printer friendly version of this page

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