Annual Reconstitution
Russell rebalances its indices once each year in June, called "reconstitution". The reconstitution consists of updating the global list of investable stocks and assigning them to the appropriate indices. The Russell indexes do not immediately replace a company that merges with another firm or has its stock delisted. However, Russell adds Initial Public Offerings (IPOs) on a quarterly basis, capturing these stocks in a systematic way.
Abnormal trading volumes caused by index fund managers re-balancing their portfolios has a history of significant market impact during the last few seconds before the New York Stock Exchange and NASDAQ closing prices are determined.
The index rebalance is typically scheduled for the closing price on the last Friday in June. The 2010 index rebalance occurred June 25th.
Read more about this topic: Russell Indexes
Famous quotes containing the word annual:
“Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it.... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
—Adam Smith (1723–1790)