Russell/Nomura Indexes Construction & Methodology Russell and Nomura produce a family of Japan equity indexes. The indexes are value weighted and include only common stocks domiciled in Japan. All indexes are subsets of the Russell/Nomura Total Market™ Index, which represents 98% of the investable Japan equity market. Determining index membership The Russell/Nomura™ Total Market Index contains the top 98% (approximately 1,775 stocks) of the available market capitalization in the Japanese market. The top 50% becomes the Russell/Nomura Top Cap™ Index, the next 35% the Russell/Nomura Mid Cap™ Index, and the smallest 15% the Russell/Nomura Small Cap™ Index. The Russell/Nomura PRIME™ Index consists of the largest 1,000 securities by available market capitalization. Determining style index membership A "non-linear probability" method is used to assign stocks to the growth and value style indexes. The term "probability" is used to indicate the degree of certainty that a stock is value or growth based on its relative book-to-price ratio. This method allows stocks to be represented as having both growth and value characteristics, while preserving the additive nature of the indexes. Based on this algorithm, 70% are classified as all value or all growth, and 30% are weighted proportionately to both value and growth. Exclusions Only one class of stock, the primary vehicle, is typically allowed within the index. Other excluded securities include: Seiri and Kanri Post stocks, closed-end investment management companies, mutual funds, limited partnerships, and non-Japan domiciled stocks. In addition, a liquidity screen is applied to the Russell/Nomura PRIME index intended to restrict exceptionally low liquidity stocks from entering the index. A liquidity screen is not applied to the members of the other indexes. Adjustments Capitalization adjustments: The purpose of this adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the investing opportunity set. Stocks are selected and weighted by their available (also called float-adjusted) market capitalization, which is calculated by multiplying the primary closing price by the available shares. Examples of adjustments include: shares outstanding for cross ownership and privately held shares. Book value adjustments: An adjustment is made for two classes of under priced assets, i.e., real estate and securities, when determining price-to-book ratio for style classification. Index reconstitution/rebalancing The Russell/Nomura Indexes are reconstituted annually to reflect changes in the marketplace. The list of companies is ranked based on October 31st available market capitalization, with the actual reconstitution effective December 1st of each year. Changes in the constituents are pre-announced and subject to change if any corporate activity occurs or if any new information is received prior to release. The Russell/Nomura PRIME™ Index limits the impact of small market movements by applying a banding methodology at reconstitution. Securities ranked 901 through 1,100 will only be included in the index if they were members prior to reconstitution up until a number of 1,000 securities is reached. If 1,000 securities are not included after this exercise, non members in this range will be included until the number of members reaches 1,000. Maintenance Securities that leave the index, between reconstitution dates, for any reason (e.g., mergers, acquisitions, or other similar corporate activity) are not replaced. Thus, the number of securities in the indexes over the year will fluctuate according to corporate activity. The only additions between reconstitution dates are as a result of spin-offs and initial public offerings falling in the large segment (as determined by the latest reconstitution).			Russell/Nomura Indexes information Daily returns Index definitions Index reconstitution Japanese site Printer friendly version of this page

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