What Is Russell 2000 Index?
Stock indices are an important part of financial markets and provide information for a basket of stocks, not just one. Created in 1984, by the Frank Russell Company, the Russell 2000 index quickly became a household name. While indices like S&P 500 act as a reference point for large-capitalization stocks, Russell 2000 reflects small-cap stocks in the United States.
Russell 2000 Definition
The Russell 2000 index measures the performance of approximately 2,000 smallest-cap American companies. The index is market-cap weighted, meaning the weight of its components changes relative to the total market capitalization.
The index is operated by FTSE Russell, of the London Stock Exchange (LSE) Group. The subsidiary also maintains other indices that it should not be confused with. The Russell 3,000 index lists the largest 3,000 US companies. The largest 1,000 companies, out of these, are listed on the Russell 1,000 index. The rest, which is small/mid-caps, is a subset of the smaller components within Russell 3,000 and belongs to Russell 2,000.
Understanding the Russell 2000 Companies
The constituents for Russell 2,000 are not chosen by a committee or the groups operating it. Instead, they are calculated according to a formula based on a combination of their market cap and current index membership.
Rebalancing takes place every June on the last trading day. The current composition includes 2,021 stocks; the top-10 companies are as follows:
|Novocure Ltd||Medical Equipment & Devices||0.39%|
|Arrowhead Pharmaceutical||Biotech & Pharma||0.33%|
|Haemonetics Corp||Medical Equipment & Devices||0.31%|
|Generac Holdings Inc||Electrical Equipment||0.30%|
|Teladoc Health Inc||Healthcare Facilities & Svcs||0.29%|
|Amedisys Inc||Healthcare Facilities||0.29%|
|Science Applications Int||Technology Services||0.27%|
|Trex Inc||Construction Materials||0.26%|
|Eastgroup Properties Inc||Real Estate||0.26%|
|Deckers Outdoor Corp||Apparel & Textile Products||0.26%|
Not all types of stocks are considered eligible to be included in the Russell 2000. These are the defining characteristics that all constituents must have – otherwise, they are excluded from the list:
- Must be traded on the U.S. exchanges
- No less than a $1.00 closing price on the rank day in May
- A total market capitalization of no less than $30 million
- More than an absolute 5% of shares available
- No royalty trusts, LLCs, limited partnerships, closed-end investment, and blank-check companies