Critical Finance Review > Vol 13 > Issue 1-2

Identification Using Russell 1000/2000 Index Assignments: A Discussion of Methodologies

Ian R. Appel, University of Virginia, USA, Appeli@darden.virginia.edu , Todd A. Gormley, Washington University in St. Louis, USA, gormley@wustl.edu , Donald B. Keim, University of Pennsylvania, USA, keim@wharton.upenn.edu
 
Suggested Citation
Ian R. Appel, Todd A. Gormley and Donald B. Keim (2024), "Identification Using Russell 1000/2000 Index Assignments: A Discussion of Methodologies", Critical Finance Review: Vol. 13: No. 1-2, pp 151-224. http://dx.doi.org/10.1561/104.00000139

Publication Date: 14 Feb 2024
© 2024 Ian R. Appel, Todd A. Gormley and Donald B. Keim
 
Subjects
 
Keywords
D22G23G30G34G35
Instrumental estimationRegression discontinuityRussell indexes
 

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In this article:
1. Russell Index Construction 
2. Challenges with Using Russell Index Membership for Identification 
3. Pre-2007 Specification Choices When Using the Russell 1000/2000 Threshold for Identification 
4. Post-2006 Specification Choices When Using the Russell 1000/2000 Threshold for Identification 
5. Discussion of Wei and Young (2019) and Glossner (2018) 
6. Concluding Remarks 
Appendix 
References 

Abstract

This paper discusses empirical methods that rely on Russell 1000/2000 index assignments for identification. Using simulated data, the paper illustrates why the varying approaches reach conflicting conclusions about the effect of index assignment on a firm’s ownership structure and corporate policies. Some estimators likely suffer from bias (e.g., those that employ a sharp regression discontinuity estimation); others do not (e.g., those that either use a fuzzy regression discontinuity or an instrumental variable estimation). The paper also discusses changes in Russell’s index assignment methodology that began in 2007 and why these changes require modifications to the existing methodologies.

DOI:10.1561/104.00000139