Why Russell Recon Day isn’t a day of boom and bust

With approximately $12 trillion in assets benchmarked to or invested in products tracking the Russell US Indexes, our annual Russell Reconstitution typically concludes with one of the highest trading volume days of the year on equity exchanges—and this year’s recon on June 24 was no exception, with over 5.64 billion shares traded across the Nasdaq and NYSE at the close.

With trading of this magnitude, we often hear it suggested that reconstitution day will be a directional catalyst for index constituent stock prices.  The theory is that investors will pile into Russell Index additions and rush for the exits on securities that are deleted.

This belief that stock prices for Russell Index additions will rise and deletions will decline on recon day hasn’t historically held true. However, liquidity providers’ ability to accommodate the surge in trading with little market impact has been a consistent feature of recon day.

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