Through The Fly's Eyes: Annual Russell Reconstitution
from Theflyonthewall.com
A Technical View
The Reconstitution of the Russell Indexes takes place once a year--as of the close on June 22nd this year-- and generally leads to additional volatility and high trading volume in names that are being added or deleted. This happens because funds that track the Russell must rebalance their funds which in turn create short-term additional demand/supply.
The impact of this supply/demand imbalance in latter years has not been as widely felt due to “banding” adopted by Russell. Banding allows shares to remain listed as long as they are within a band of value. See the information on the Russell Indexes.
More general information on the process is available here. It is possible that derivative products may also have lessened the impact of volatility.
The reconstitution this year includes a special feature. For the first time, companies determined to be BDI, or Benefits Driven Incorporation, are going to be added to the US Indexes. BDI corporations incorporate in regions that have favorable taxation or other benefits.
It is difficult to determine exactly what the short-term and long-term impacts on price may be as a result of the flurry of trading that will take place tomorrow. Generally the more indexes that a stock participates in, the greater the demand for those shares over time. We have noticed that some of the BDI names being added to the Russell 3000 this year are being upgraded, as happened with RenaissanceRE Holdings (RNR) today and that may be an additional factor propelling names along. You can find additional Analyst Recommendation information at our main website, www.theflyonthewall.com.
One potential technical impact may be the addition of names to the indexes which happen to have relatively low average trading volume or small trading floats. We have ranked those names accordingly, below, and have also split our list into Russell 3000 additions and Russell Micro Index additions, courtesy of the Russell Investment Group, which provided the information.
Russell Micro-Cap Index Additions 2007
| Company Name | Avg.Volume | Trading Float |
| TBS International Ltd (TBSI) | 498,423 | 9,400,000 |
| PXRE Group Ltd (PXT) | 369,190 | 71,700,000 |
| Scottish RE Group Ltd (SCT) | 329,472 | 57,100,000 |
| W.P. Stewart & Co Ltd (WPL) | 317,420 | 22,400,000 |
| Quanta Capital Holdings Ltd (QNTA) | 234,462 | 69,400,000 |
| Knightsbridge Tankers Ltd (VLCCF) | 203,332 | 16,900,000 |
| RAM Holdings Ltd (RAMR) | 197,030 | 18,400,000 |
| Primus Guaranty Ltd (PRS) | 129,980 | 44,000,000 |
| | 89,830 | 13,200,000 |
| Castlepoint Holdings Ltd (CPHL) | 68,119 | |
| CRM Holdings Ltd (CRMH) | 52,546 | 11,900,000 |
| MC Shipping Inc (MCX) | 25,590 | 4,100,000 |
| American Safety Insurance Hldgs (ASI) | 23,800 | 9,600,000 |
Russell 3000 Index Additions 2007
| Company Name | Avg. Volume | Trading Float |
| Tyco International (TYC) | 16,904,750 | 1,962,600,000 |
| Marvell Technology Group Ltd (MRVL) | 12,719,730 | |
| Nabors Industries Ltd (NBR) | 5,156,740 | 278,000,000 |
| Ingersoll-Rand Co Ltd (IR) | 3,457,970 | 298,600,000 |
| Accenture Ltd (ACN) | 3,284,247 | 769,100,000 |
| Ace Ltd (ACE) | 1,904,128 | 328,000,000 |
| XL Capital Ltd (XL) | 1,704,024 | 173,300,000 |
| FrontLine LTD (FRO) | 1,441,905 | 48,600,000 |
| UTi Worldwide Inc (UTIW) | 914,116 | 83,600,000 |
| Axis Capital Holdings Ltd (AXS) | 907,047 | |
| IPC Holdings Ltd (IPCR) | 783,508 | 63,300,000 |
| Lazard Ltd (LAZ) | 671,720 | 39,200,000 |
| Ship Finance International Ltd (SFL) | 608,761 | 18,200,000 |
| Security Capital Assurance Ltd (SCA) | 604,143 | 64,600,000 |
| Aspen Insurance Holdings Ltd (AHL) | 596,090 | 86,400,000 |
| VistaPrint Ltd (VPRT) | 575,420 | 39,600,000 |
| Everest Re Group Ltd (RE) | 527,020 | 62,600,000 |
| TBS International Ltd (TBSI) | 498,423 | 9,400,000 |
| Teekay Corp (TK) | 490,973 | 72,600,000 |
| Renaissancere Holdings Ltd (RNR) | 464,990 | 68,700,000 |
| Montpelier Re Holdings Ltd (MRH) | 450,935 | |
| Warner Chilcott Ltd (WCRX) | 435,079 | 243,000,000 |
| Arch Capital Group Ltd (ACGL) | 431,382 | 51,700,000 |
| Endurance Specialty Holdings Ltd (ENH) | 423,390 | 58,600,000 |
| Platinum Underwriters Holdings Ltd (PTP) | 395,150 | 59,500,000 |
| PXRE Group Ltd (PXT) | 369,190 | 71,700,000 |
| Partnerre Ltd (PRE) | 368,200 | 56,300,000 |
| Orient-Express Hotels Ltd (OEH) | 336,180 | 5,500,000 |
| Scottish RE Group Ltd (SCT) | 329,472 | 57,100,000 |
| Max Capital Group Ltd (MXGL) | 320,699 | 59,100,000 |
| W.P. Stewart & Co Ltd (WPL) | 317,420 | 22,400,000 |
| Assured Guaranty Ltd (AGO) | 265,156 | 48,100,000 |
| Golar LNG Ltd (GLNG) | 239,000 | 34,700,000 |
| Allied World Assurance Co Hldgs Ltd (AWH) | 228,650 | 60,100,000 |
| Nordic American Tanker Shipping Ltd (NAT) | 216,780 | 21,000,000 |
| Global Crossing Ltd (GLBC) | 216,489 | 35,800,000 |
| Global Sources Ltd (GSOL) | 204,009 | 12,300,000 |
| Knightsbridge Tankers Ltd (VLCCF ) | 203,332 | 16,900,000 |
| RAM Holdings Ltd (RAMR) | 197,030 | 18,400,000 |
| Ultrapetrol Ltd (ULTR) | 183,489 | 18,100,000 |
| Central European Media Enterprises (CETV) | 161,251 | 31,200,000 |
| Primus Guaranty Ltd (PRS) | 129,980 | 44,000,000 |
| Flagstone Reinsurance Holdings Ltd (FSR) | 101,930 | 72,500,000 |
| | 89,830 | 13,200,000 |
| Castlepoint Holdings Ltd (CPHL) | 68,119 | |
| Steiner Leisure Ltd (STNR) | 64,669 | 15,800,000 |
| Enstar Group Ltd (ESGR) | 9,768 | 6,200,000 |
posted by Theflyonthewall.com at
1:17 PM
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