Journal article
Long-term impact of Russell 2000 Index rebalancing
Financial analysts journal, v 64(4), pp 76-91
01 Jul 2008
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
The study reported here examined the long-term impact of Russell 2000 Index rebalancing on portfolio evaluation, A buy-and-hold index portfolio outperformed the annually rebalanced index in the 1979-2004 period by an average of 2.22 percent over one year and 17.29 percent over five years. Although short-term momentum and the poor long-term returns of new issues partially explain these returns, index deletions were found to provide significantly higher factor-adjusted returns than index additions. Some small-capitalization fund managers appear to capture a portion of these benefits. The strongest performing funds enhanced their factor-adjusted returns by an average of 1.45 percent per year by holding index deletions and/or avoiding index additions. Among the weakest performing funds, higher returns from holding index deletions were offset by the poor returns of new issues added to the index. Thus, index methodology may provide a structural incentive for portfolio managers to drift from their benchmarks.
Metrics
Details
- Title
- Long-term impact of Russell 2000 Index rebalancing
- Creators
- Jie Cai - Drexel UniversityTodd Houge - Univ Iowa, Iowa City, IA USA
- Publication Details
- Financial analysts journal, v 64(4), pp 76-91
- Publisher
- Taylor & Francis
- Number of pages
- 16
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:000258048900007
- Scopus ID
- 2-s2.0-49649096171
- Other Identifier
- 991019168788004721
UN Sustainable Development Goals (SDGs)
This publication has contributed to the advancement of the following goals:
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Business, Finance