Research and insights
Russell's heritage is in money manager research. Today, more than 400 employees are dedicated to researching investment products and money managers.
Our worldwide presence and leadership in indexes place us in a unique position of insight into the world of indexes.
All about the indexes and the markets they measure
|
Index alerts
May 14, 2013
|
From Intersec Research
Intersec profiles its manager universe with Russell's Stability Style Indexes (PDF)
April 2013
The findings in this new research paper by InterSec Research demonstrates how Russell Defensive and Dynamic Indexes™ are useful research tools and are better predictors in evaluating manager performance in different market cycles.
Featured in The Journal of Investing
International small cap: Defining a promising asset class (PDF)
March 2013
Mat Lystra, Senior Research Analyst
This paper defines and profiles the international small cap asset class; reviews the performance and traits of international small cap managers against that of the Russell Global ex-U.S. Small Cap Index; and contrasts the construction of various global small cap indexes and the resulting implications for a global equity portfolio.
Greece: Re-emerged (PDF)
February 2013
Mat Lystra, Senior Research Analyst
Greece has been a world financial concern since at least 2009 when levels of public debt were revealed to be unsustainable. Since 2010, Greece has been on the three-year path specified by Russell's global indexes methodology towards possible reclassification as an emerging market. During our 2013 global market risk reviews, Greece failed our risk assessments as a developed market for a third consecutive year. Therefore, effective with June 2013 index reconstitution, Russell will reclassify Greece as an emerging market.
Russell Low Volatility Indexes: Helping moderate life's ups and downs (PDF)
February 2013
David Koenig, CFA, FRM, Investment Strategist
Investor concern about market volatility in recent years has spurred interest in index-based investment strategies focused on stocks that have exhibited lower volatility historically than their parent indexes. In this environment of heightened uncertainty, investors have turned to low volatility strategies as an efficient way to help manage portfolio volatility while maintaining equity market participation.
Gaining better market insight by combining Defensive/Dynamic with Growth/Value indexes (PDF)
February 2013
Dave Hintz, CFA, Equity Portfolio Manager, Investment Division
Catherine Yoshimoto, Senior Product Manager, Indexes
Because Russell's research indicates that many active equity managers
demonstrate persistent preferences not only for growth or value stocks, but also for more stable (Defensive) or less stable (Dynamic) stocks, Russell now expands its style benchmark offerings with four indexes that combine the Russell Defensive and Dynamic style indexes with its Growth and Value style indexes. This paper discusses how these new benchmarks are constructed to meet the needs of active style managers following the four investing approaches, as well as the characteristics and performance of a combined style index.
Global size definition: How Korea matters (PDF)
January 2013
Mat Lystra, Senior Research Analyst
The conventional wisdom is that there is convergence in major index providers’ construction of their indexes - that they are all created roughly equal. Indeed, one has to assume that this belief played a role in the recent benchmark changes made by fund provider Vanguard. Those of us working for the various major index providers would tell you that this isn’t true - that in fact there are important differences worthy of deliberation. As a benefit to users of indexes, our industry is seeing these types of debates play out at a heightened pace due to the Vanguard changes. Moments like this can be tipping points within our industry, opportunities to challenge conventional wisdom regarding the importance of index construction. We present just such a challenge in the following analysis.
2012 Market Review (PDF)
January 2013
Layla Hirschfelt, Senior Product Manager
After a challenging 2011, the broad markets closed the year 2012 generating positive annual returns, providing a refreshing change of course despite looming macroeconomic issues in Europe, fiscal uncertainties in the U.S. and predictions of slower economic growth globally. This Market Review provides an analysis of 2012 global equity markets performance that covers regions, capitalization sizes and style components and includes comparisons to historical results. For the second year in a row, we also provide a performance analysis of the Russell Stability Indexes, which measure the defensive and dynamic aspects of markets.
The Russell High Efficiency Defensive Index Series (PDF)
January 2013
Khalid Ghayur, CFA
Pradeep Velvadapu, Senior Research Analyst
Introducing the Russell High Efficiency Defensive Index™ (HEDI), a new index series Russell has developed in alliance with Westpeak Global Advisors. This index series leverages the underlying data used in constructing the stability probabilities of the capitalization-weighted Russell Defensive Index™ and selects and weights stocks so as to create a direct link between a security's stability input data and its active weight in the portfolio relative to a policy benchmark. This construction approach is in contrast to that of the capitalization-weighted defensive indexes, where stocks are also selected on the basis of the stability probability, but broadly weighted by their market capitalization.
Available Foreign Ownership: Exploring a Reconstitution 2012 methodology enhancement to the Russell Global Index series (PDF)
December 2012
Kyla Roberts, Research Analyst
While traditional float considerations such as strategic individual and government holdings continue to be the most significant limiting factors for investors, foreign investing introduces additional factors for consideration for index investability: foreign ownership limits and Available Foreign Ownership (AFO). When a company’s AFO is less than 5% it is now removed from the Russell Global Index. This paper presents the new rule and details its impact on specific Russell Indexes.
Small cap active managers and their benchmarks: The differences (PDF)
November 2012
Steve Swartley, Senior Research Analyst
Russell believes that U.S. small cap is one of the most fertile asset classes in its potential for generating excess returns. Whether they elect to work with individual or multiple managers, it is important that investors understand the typical factor and sector tilts small cap managers display vis-à-vis their benchmarks. Russell has been able to create a proprietary database of equity profile characteristics through time. Based on the stock-specific holdings of more than 300 small cap and SMID cap products, the database gives us the unique opportunity to evaluate managers' actual behavior and positioning relative to their relevant benchmarks. In this paper we will briefly review the differences between the Russell 2000 and Russell 2500 style indexes, and then analyze the positioning of average small cap growth, value and market-oriented managers by use of the quarterly holdings data of individual managers over the five-year period 2Q07 to 2Q12.
Index competition good for ETF investors (video interview)
October 2012
Ken O'Keeffe, Managing Director of Investable Products
Ken O'Keeffe, Managing Director of Investable Products at Russell Indexes talks with ETF Trends Editor, Tom Lydon, about the impact and opportunities for the indexing business in the wake of Vanguard’s recent decision to transition away from MSCI to benchmarks managed by FTSE and CRSP.
The frontier markets of Europe: update (PDF)
October 2012
Mary Fjelstad, Senior Research Analyst
The Russell Frontier Index (RFI) captures Europe's inherent geographic and economic diversity in companies from 12 countries, across all nine economic sectors and across capitalization size tiers. Despite the relatively large number of countries represented, in 2011 the frontier Europe region was the second-smallest in the RFI by market cap. At 13.0% of aggregate frontier markets, frontier Europe was smaller than frontier Africa. In this paper we revisit the Russell Frontier Europe Index as constituted as of September 30th, 2012 and examine the index's performance, constituent, size and sector characteristics relative to developed, emerging and aggregate frontier markets.
Product Insight: A tale of two Koreas? (PDF)
October 2012
Mat Lystra, Senior Research Analyst
Vanguard’s recent ETF benchmark changes have generated significant buzz in the industry. Any industry leader’s switch from one index to another naturally leads to questions about how those indexes differ, and one thread in the current discussion concerns country risk classification. This article evaluates the merits of the Russell Indexes classification process and how that process leads us to affirm that South Korea remains an emerging market.
Stability Is the Risk Dimension of Equity Style (PDF)
October 2012
Barry Feldman, Ph.D., CFA, Senior Research Analyst
This study tests the relative ability of the Russell Stability Style Indexes to identify company risk. Three forward-looking measures serve as risk proxies: I/B/E/S analyst earnings forecast dispersion, S&P company credit rating and company expected life - a model-based statistic developed by Northfield. These measures have low mutual correlation and appear to provide a robust representation of risk at the company level. The factor alternatives to stability tested include beta, volatility, valuation, momentum, size and quality. Low- and high-risk company samples are constructed for all measures. Forecast dispersion tests are based on differences in sample identification and misidentification rates. Credit rating and expected life tests are based on differences in sample averages. Stability is found to consistently do best at identifying company risk.
The Performance of Eurozone Stock Markets During the Great Recession (PDF)
September 2012
Mary Fjelstad, Senior Research Analyst
Periods of market upheaval and economic recession are typically characterized by investor flight to quality. In times of uncertainty and fear, many investors either reduce their exposures to equities overall, or sell off their "riskier" equity holdings, such as small cap or deep-value stocks. During the Great Recession, when was the best time for these investors to move back into equity strategies? In this paper we examine the performance of Eurozone equity markets during the Great Recession. We center our analysis at the trough of April 2009, which the Centre for Economic Policy Research (CEPR) has designated as the end of the Great Recession in the Eurozone.
The Russell Geographic Exposure Index Series (PDF)
September 2012
Tom Goodwin, PhD., Senior Research Director
Mark Paris, CFA, Senior Research Analyst
For companies that operate outside their home countries, revenues, profits and asset values are affected by the geographic distribution of their operations. Traditional means of classifying and analyzing a firm, based on the country of its headquarters or the exchange on which its stock is traded, may not fully capture this distribution. In response to this shift to multinational operations, we introduce the Russell Geographic Exposure™ ("GeoExposure") Indexes series, which identifies companies with significant exposure to targeted geographic regions or countries. Russell's first application of the geographic exposure concept has been in creating equity indexes comprised of developed market companies with a large amount of business stemming from emerging countries.
Product Insight: The Russell Top 50® Mega Cap Index (PDF)
September 2012
At a time when slow global economic growth and market volatility are a persistent and constant challenge, U.S. "mega cap" stocks have emerged as an attractive opportunity for investors seeking safety while maintaining participation in equity markets. "Mega cap", as defined by the Russell Top 50 Mega Cap Index, represents 50 of the largest U.S. securities. These stocks hold broad appeal to many investors in the current environment as they may provide a combination of attractive relative yield, low volatility and steady earnings growth. Due to their relative size and scale, mega cap companies may be more diversified, better capitalized and more able to endure economic shocks.
The Fundamental Index Series - An investment strategy (PDF)
September 2012
Tom Goodwin, PhD., Senior Research Director
What is the size of a publicly traded company? The answer on Main Street will likely be different than on Wall Street. For most people on Main Street, the size of a company is defined by its sales revenue, or the number of its employees, or perhaps the value of its physical assets. But for investors on Wall Street, the size of company is its market capitalization: the current market price of a share of its stock times the number of shares outstanding. What if there are sometimes disconnects between the Main Street and Wall Street measures of company size? What if there were also a means for taking advantage of such disconnects? That is the intriguing premise behind Russell’s Fundamental Indexes.
An introduction to the Russell Europe SMID 300 Index (PDF)
September 2012
Gareth Parker, Senior Director, Index Research, Design & Development, EMEA
The Russell Europe SMID 300 Index is designed to be a highly tradable representation of the small- and mid-cap (SMID-cap) opportunity set in developed European markets. To enable easy market access, the new index, constructed via Russell’s traditional rules-based, transparent methodology, comprises a limited number of highly liquid constituents. It is designed to be a more accurate, lower implementation-cost alternative to the existing indexes used as proxies for small- and mid-cap developed European markets, which Russell believes lack sufficient liquidity to be an ideal basis for investment vehicles.
Global equity markets at Russell Index Reconstitution June 2012 (PDF)
July 2012
Kyla Roberts, Research Analyst
The annual Reconstitution of the Russell Indexes took effect on June 22, 2012. In this paper we take the opportunity to review market conditions and characteristics of the past year and to examine changes that occurred between Recon 2011 and Recon 2012 in global equity markets as represented by Russell Global Indexes. In our analysis of the major regions in those markets and of how their characteristics have changed since Recon 2011, we include frontier markets for the first time.
Grexit: Response to the potential exit of Greece from the European Monetary Union (PDF)
June 2012
We are increasingly concerned about market conditions in Greece, which since 2001 has been designated a developed market within the Russell Global Index (RGI) country classification system. While recognizing Greece is a distressed market, at the time of this writing, we are not taking pre-emptive action to remove Greece from the RGI because we believe such action should not be based on subjective assessments. However, given the escalating market uncertainty in Greece and the difficulty of forecasting future political outcomes, this research note will seek to clarify some of the conditions under which we may implement Russell's financial crisis rule to remove Greece from the index.
Revisiting microcap: Challenges and opportunities (PDF)
June 2012
Mat Lystra, Senior Research Analyst
The Russell Microcap Index was created to give managers and other investors an objective benchmark that captures the very smallest investable companies in the U.S. equity market. Since then, equity markets have experienced historic bubbles and busts, and the Russell Microcap Index structure has adjusted in response to the changing market environment. This paper updates Steve Swartley’s 2005 white paper, which introduced the index and profiled the asset class, and discusses the performance, risk, market capitalization levels and membership of the index. We also discuss the prospective need for a benchmark in the fledgling international microcap space, offering insight into the structure and characteristics such an index would have.
A tailored view of European markets through Russell Custom Indexes (PDF)
June 2012
Pradeep Velvadapu, Senior Research Analyst
Noriyuki Oharazawa, Index Strategy Director
Amidst the evolving global investment landscape, investors continually seek index solutions designed to meet their specific needs. Russell Custom Indexes represent an opportunity for investors to achieve individualized exposures corresponding to their objectives. The accuracy and flexibility of custom indexes enable their adaptation to investors' distinct strategies. In this report we showcase examples of Russell Custom Indexes in European markets to demonstrate the targeted exposures custom indexes can provide. In particular, we consider hypothetical custom indexes that incorporate sector, region and size constraints.
High dividend strategies: Reviving an old concept relevant for modern times (PDF)
May 2012
Xin Yan, Ph.D., Senior Research Analyst
Mark L. Paris, CFA, Senior Research Analyst
Russell launched the Russell High Dividend Yield Index series in March 2012. These indexes are based on an innovative methodology designed to provide exposure to high-dividend-paying stocks that not only generate high yields, but also exhibit financial strength. The Russell methodology employs specialty quality screens combined with modified market-cap weighting to limit company-specific and financial sector risks. In this paper we examine the Russell U.S. Large Cap High Dividend Yield Index (RHDY) to highlight how Russell’s focus on maximizing yield, selecting high-quality companies and controlling risk provides better index construction and decreases susceptibility to common dividend-investing traps.
The Russell Fundamental Index® Series: Innovative rebalancing provides better representation without impacting turnover (PDF)
May 2012
Pradeep Velvadapu, Senior Research Analyst
One of the hallmarks of a cap-weighted index is its "automatic rebalancing" characteristic, whereby the need for rebalancing does not arise from constituent price changes. Price changes do affect the structures of non-cap weighted indexes, however; thus, such indexes need more frequent reweighting to ensure their continuing representativeness. In this paper, we discuss rebalancing in the Russell Fundamental Index series, whose constituents are selected and weighted by fundamental measures of company size, not by market capitalization.
Market review: An analysis of the Russell Stability Indexes™ in European markets (PDF)
April 2012
Mark Paris, Senior Research Analyst
Pradeep Velvadapu, Senior Research Analyst
Noriyuki Oharazawa, Index Strategy Director
Russell Stability Indexes incorporate quality metrics that measure stock-specific risks in addition to risks associated with price volatility. In this paper, we briefly discuss the methodology behind the Russell Stability Indexes. We follow with a comparison of the Russell Europe Defensive (EURDEF) and the Russell Europe Dynamic (EURDYN) indexes in terms of their regional breakdowns, country distributions and sector profiles. Finally, we examine the EURDEF's and the EURDYN's performances over time.
Introducing a new standard in LDI benchmarking: The Barclays-Russell LDI Index Series (PDF)
April 2012
Martin Jaugietis, CFA, Director - Head of LDI Solutions
Jeff Hussey, CFA, Global Chief Investment Officer - Fixed Income
Justin Harvey, Asset Allocation Strategist
The Barclays-Russell LDI Index Series seeks to address the potential shortfalls of the indexes available today and to provide a natural next step for plans seeking to improve the hedging precision of their liability-driven investment (LDI) portfolios. This index series also seeks to meet the needs of LDI fixed income portolio managers looking for a group of transparent indexes that have been designed specifically for hedging U.S. pension liabilities that are investable and priced by a third party.
The making of a better benchmark (PDF)
March 2012
Jon Christopherson, Ph.D., Research Fellow Emeritus
Our objective is to shed some light on what makes a good benchmark and to help investors assess arguments for change. We focus on the important role an index plays in the investment process as a benchmark, and identify the most important characteristics an index must have in order to play this role effectively. We explain some of the important trade-offs providers must address in the construction of better benchmarks and conclude with a brief discussion of the expansion of the definition of “index,” given that indexes are moving beyond being market benchmarks and into the next generation of methodologies.
Lending certainty to volatility: Russell's new Volatility Control Indexes (PDF)
February 2012
Xin Yan, Ph.D., Senior Research Analyst
Russell's new Volatility Control Index series has been designed as an overlay methodology for any of Russell’s other indexes. The indexes give the clients of structured-products providers the means to control the volatility of their market exposures in a highly customizable fashion. Investors can select a variety of volatilities, leverage amounts and rebalancing frequencies, all based on Russell Indexes research.
Recessions and the U.S. equity market: Update 2012 (PDF)
February 2012
Mary Fjelstad, Sr. Research Analyst
When we compare the performance of the U.S. equity market during the Great Recession to the average outcomes from the prior four recessionary periods, we see consistency in some outcomes but not in all. Our study demonstrates that each recession is unique; investors must bear that in mind when positioning portfolios around recessionary troughs.
The frontier markets of Africa (PDF)
February 2012
Kyla Roberts, Associate Research Analyst
Known for its history of political instability and violent struggle, Africa is often characterized by a reputation for uneven levels of development, poor infrastructure and a dearth of technical skills. Yet successful initiatives to stabilize and strengthen African economies have helped make African equity markets not only viable investment opportunities but also a noteworthy segment of global frontier markets. In this paper we update our analysis of the frontier Africa region.
The frontier markets of the Americas (PDF)
February 2012
Kyla Roberts, Associate Research Analyst
Latin America has been known for abundant natural resources, commodities-driven economic growth and poor infrastructure. Several decades of relative political calm in many countries, however, and strong recent commodity prices have begun to present new opportunities for international investors. In this analysis, we introduce the Russell Frontier Americas Index and examine its characteristics.
The frontier markets of Asia-Pacific (PDF)
February 2012
Kyla Roberts, Associate Research Analyst
Stretching from Europe to the Pacific, the geographically, socially and economically diverse Asia-Pacific region comprises a dynamic blend of developed, emerging and frontier markets. The Russell Frontier™ Index captures the frontier Asia-Pacific investable opportunity set with coverage across seven countries: Bangladesh, Kyrgyzstan, Kazakhstan, Sri Lanka, Papua New Guinea, Pakistan and Vietnam. This paper revisits frontier Asia-Pacific markets and reports on their recent performance.
The frontier markets of the Middle East (PDF)
February 2012
Kyla Roberts, Associate Research Analyst
The Middle East region is noted for the abundant oil reserves and petroleum production that have historically driven its economies. Despite ongoing political storms, new opportunities may arise for international investors as countries in the region undertake actions to open their markets and diversify their economies. In this analysis we revisit the index and report on its performance, constituent, size and sector characteristics.
2011 Market Review – The year in review (PDF)
January 2012
Layla Hirschfelt, Product Manager
The year 2011 presented investors with a host of challenges — including natural disasters in Asia, political upheaval in the Middle East and the carryover from 2010 of the euro zone debt crisis. This report provides an analysis of 2011 performance of global equity markets, covering major world regions, all three style components — size, valuation and stability — and comparisons to historical results.
Defensive equity: Is the market mispricing risk? (PDF)
June 2011
Bob Collie, FIA, Chief Research Strategist, Americas Institutional
John Osborn, CFA, Director, Consulting, Americas Institutional
Intuitively, you might expect stocks that are less risky than other stocks — stocks we refer to as defensive stocks — to deliver lower returns than the broad market over the long term. That does not seem to have been the case, however. Download this research to learn how a defensive equity strategy could offer the possibility of a reduction in portfolio risk and a more attractive trade-off between risk and reward.
Correlations have fat tails, too (PDF)
April 2011
Bob Collie, FIA, Chief Research Strategist, Americas Institutional
You are probably familiar with the idea of fat tails — extreme outcomes can occur more frequently (i.e., tails are fatter) in practice than implied by a normal distribution. However, many investors haven't realized that volatility does not fully illustrate the uncertainty associated with asset returns — correlations have fat tails, too. This paper outlines why traditional modeling falls short and how investors may be relying too heavily on correlation statistics when making decisions about liability hedging and diversification.
The Third Dimension of Style™ : Introducing the Russell Stability Indexes (PDF)
December 2010
Dave Hintz, CFA, Head U.S. Equity Research, Investment Division
In addition to market capitalization and (growth/value) style, Russell is now including a third dimension, called "stability," in its benchmarks. Stability is based on a powerful set of descriptive variables that, in certain market environments, do more to explain money manager performance than traditional style measures do. One end of the stability dimension is labeled "defensive" and the other is labeled "dynamic."
Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
|
Home Client log on Contact us Newsroom Careers
