Factors that Could Alter the Russell Final Index in 2021

6/10/2021

Markets

0 min read


Image Credit: Luis Villa del Campo (Flickr)

FTSE Russell Inaccuracies and Changes Before Final Adjustment

Over the next two Fridays, The FTSE Russell will post updates to its equity index reconstitutions that had been announced last Friday. These updates and adjustments to the original lists provided could occur for a number of reasons. The reactions to stock prices impacted could be strong as these announcements (when they occur) are less predictable and not surrounded by hundreds of other companies being added or deleted, attracting investor focus. The adjustment announcements will be after 6pm ET on June 11 and June 18. Below are some of the reasons that FTSE Russell may adjust their newly included companies just a week or two after the initial announcement.

FTSE Russell makes every effort to maintain its indexes to high standards. Nevertheless, inaccuracies may arise in the index and constituent data from time to time and investors, index constituents, licensees or other market participants should be aware of this. Such inaccuracies may arise as a result of a range of events, including the complexity of certain corporate events, late announced or missed dividends, pricing errors, external disruptions or market distortions, incorrect, incomplete or late data input whether occurring internally or externally to FTSE Russell, and incorrect application of index criteria such free floats, sectors or constituent make-up. – FTSE Russell

Possible Reasons for Adjustments from the FTSE Russell Equity Index Guidelines:

Incorrect Close Price Used

Action- Change index constituent and replace.

Incorrect or Ineligible Company Added

Action- Change index constituent and replace.

Incorrect Currency Used to Evaluate

Action- Recalculate and Change.

Dividend Measurement Issues

Incorrect Dividend Amount – Captured on ex-date.

Incorrect Dividend Amount – Captured after ex-date (where ex-date is not the last business day of the month).

Dividend Incorrectly Applied prior to ex-date.

Ticker Symbol Change

Action- Adjust Ticker to reflect current identifier.

Change in Company (ie: merged, acquired, large divestiture) prior to third Friday in June.

Action- Recalculate and Change.

A complete list of the Russell index additions announced on June 4, 2021, can be found here. Many of the companies have already experienced “out of the ordinary” activity in their shares.

Take-Away

The annual reconstitution is a significant driver of dramatic shifts in affected stock prices as index portfolio managers have their required holdings adjusted for them. The initial list from FTSE Russell is largely accurate and has a big impact on stocks. Any revisions from there could provide opportunity. It’s worth paying attention to.

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