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

Abstract

This paper discusses tradeoffs of various empirical methods that rely on Russell 1000/2000 index assignments prior to 2007 for identification and explains why the different approaches reach conflicting conclusions about the effect of index assignment on firm’s ownership structure and corporate policies. The paper also discusses changes in Russell’s methodology beginning in 2007 and empirical methods that can be used to continue using the setting as a source of identification for more recent years.

Keywords: instrumental estimation, regression discontinuity, Russell indexes

JEL Classification: D22, G23, G30, G34, G35