Working Paper: NBER ID: w26370
Authors: Itzhak Bendavid; Francesco Franzoni; Rabih Moussawi
Abstract: 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).
Keywords: Russell Indexes; Index Assignment; Corporate Finance; Asset Pricing
JEL Codes: G12; G14; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| New ranking variable (C29) | Prediction of stock assignments (G17) |
| ETF ownership (G23) | Stock volatility (G17) |
| Index reconstitution (C43) | ETF ownership (G23) |
| Index reconstitution (C43) | Stock volatility (G17) |