The Russell Indexes are a family of global equity indices that allow investors to track the performance of distinct market segments worldwide. Many investors use mutual funds or exchange-traded funds based on the Russell Indexes as a way of gaining exposure to certain portions of the U.S. stock market. Additionally, many investment managers use the Russell Indexes as benchmarks to measure their own performance. Russell's index design has led to more assets benchmarked to its U.S. index family than all other U.S. equity indexes combined. As of June 2008, Russell's indexes had $4.0 trillion in assets benchmarked to them and accounted for 63.3 percent of assets benchmarked by institutional investors.
History
Tacoma, Washington-based Russell's index story, began in 1984 when the firm launched its family of U.S. indices to measure U.S. market segments and hence better track the performance of investment managers. The resulting methodology produced the broad-market Russell 3000 Index and sub-components such as the small-cap Russell 2000 Index. The broad-market U.S. index is the Russell 3000 Index, which is divided into several sub-indexes, including the small-cap Russell 2000 Index. Using a rules-based and transparent process, Russell forms its indexes by listing all companies in descending order by market capitalization adjusted for float, which is the actual number of shares available for trading. In the United States, the top 3,000 stocks (those of the 3,000 largest companies) make up the broad-market Russell 3000 Index. The top 1,000 of those companies make up the large-cap Russell 1000 Index, and the bottom 2,000 (the smallest companies) make up the small-cap Russell 2000 Index.
Construction Methodology
The Russell Indexes are objectively constructed based on transparent rules. The broadest U.S. Russell Index is the Russell 3000E Index which contains the 4,000 largest (by market capitalization) companies incorporated in the U.S., plus (beginning with the 2007 reconstitution) companies incorporated in an offshore financial center that have their headquarters in the U.S.; a so-called "benefits-driven incorporation". Each Russell Index is a subset of the Russell 3000E Index and broken down by market capitalization and style. The members of the Russell 3000E Index and its subsets are determined each year during annual reconstitution and enhanced quarterly with the addition of Initial Public Offerings (IPOs). The Russell 3000E Index represents approximately 99 percent of the U.S. equity market. Russell excludes stocks trading below $1, stocks that trade on the pink sheets and OTC Bulletin Board, closed-end mutual funds, limited partnerships, royalty trusts, non-U.S. incorporated stocks (other than the benefits driven incorporations described above), foreign stocks, and American Depositary Receipts (ADRs). Also, Berkshire Hathaway is excluded despite its large market capitalization because its high price per share limits its liquidity.
Annual Reconstitution
Russell rebalances its indices once each year in June, called "reconstitution". The reconstitution consists of updating the global list of investable stocks and assigning them to the appropriate indices. The Russell indexes do not immediately replace a company that merges with another firm or has its stock delisted. However, Russell adds Initial Public Offerings (IPOs) on a quarterly basis, capturing these stocks in a systematic way.
Primary Indexes
In addition to the primary indices listed below, Russell publishes Value and Growth versions of each U.S. index. This divides each index roughly in half, separating companies classified as value stocks from those classified as growth stocks. Companies can appear in both the value and growth versions of an index, though the total number of shares between the value and growth versions will equal the number in the main index. The primary indices are:
- Russell 3000 Index: The large-cap index of the top 3,000 stocks in the Russell 3000 Index.[1]
- Russell 2500 Index: A mid-cap to small-cap index of the bottom 2,500 stocks in the Russell 3000 Index.
- Russell 2000 Index: The small-cap benchmark index of the bottom 2,000 stocks in the Russell 3000 Index.
- Russell 1000 Index: The large-cap index of the top 1,000 stocks in the Russell 3000 Index.
- Russell Top 200 Index: The mega-cap index of the very largest 200 stocks in the Russell 3000 Index.
- Russell Top 50 Index: Measures the performance of the 50 largest companies in the Russell 3000 Index.
- Russell Midcap Index: The bottom 800 stocks in the Russell 1000 Index. The Russell Top 200 Index plus the Russell Midcap Index yields the Russell 1000 Index.
- Russell Microcap Index: A micro-cap index of the stocks ranked from 2,001-4,000 in the Russell indexing universe, consisting of capitalizations ranging from about $50 million to $2.5 billion. Hence, this is an index of the 1,000 smallest Russell 3000 stocks, plus the 1,000 smaller stocks.
- Russell Small Cap Completeness Index: The index includes stocks from the Russell 3000 Index that do not appear in the S&P 500 Index. The Index measures the performance of the Russell 3000 companies excluding S&P 500 constituents.
Russell indices in Japan
Russell/Nomura equity indices for Japan (calculated with Nomura Securities Co., Ltd.) offer broad market or style benchmarks for investors in that country. These pioneering, comprehensive, equity style indices offer free-float adjustment in the Japanese market.
Investing
There are numerous asset managers that offer ETFs which attempt to replicate the movement of Russell Indexes in a combination of ways as listed below:
Index
Russell 1000 NYSE: IWB
Russell 2000 NYSE: IWM
Russell 3000 NYSE: IWV
Russell Midcap NYSE: IWR
Russell Microcap NYSE: IWC
Russell Top 50 NYSE: XLG
Index Inverse
Russell 2000 NYSE: RWM
Sector
Russell 1000 Growth NYSE: IWF
Russell 1000 Value NYSE: IWD
Russell 2000 Value NYSE: IWN
Russell 2000 Growth NYSE: IWO
Russell 3000 Value NYSE: IWW
Russell 3000 Growth NYSE: IWZ
Russell Midcap Growth NYSE: IWP
Russell Midcap Value NYSE: IWS
Russell/Nomura Small Cap Japan ETF NYSE: JSC
Russell/Nomura PRIME Japan ETF NYSE: JPP
Index Leveraged 200%
Russell 2000 NYSE: UWM
Russell 2000 NYSE: RRY
Russell 3000 NYSE: UWC
Index Inverse Leveraged 200%
Russell 2000 NYSE: TWM
Russell 2000 NYSE: RRZ
Russell 3000 NYSE: TWQ
Sector Leveraged 200%
Russell 1000 Value NYSE: UVG
Russell 1000 Growth NYSE: UKF
Russell 2000 Value NYSE: UVT
Russell 2000 Growth NYSE: UKK
Russell Midcap Value NYSE: UVU
Russell Midcap Growth NYSE: UKW
Sector Inverse Leveraged 200%
Russell 1000 Value NYSE: SJF
Russell 1000 Growth NYSE: SFK
Russell 2000 Value NYSE: SJH
Russell 2000 Growth NYSE: SKK
Russell Midcap Value NYSE: SJL
Russell Midcap Growth NYSE: SDK
Index Leveraged 300%
Russell 1000 NYSE: BGU
Russell 2000 NYSE: TNA
Russell Midcap NYSE: MWJ
Index Inverse Leveraged 300%
Russell 1000 NYSE: BGZ
Russell 2000 NYSE: TZA
Russell Midcap NYSE: MWN
Sector Leveraged 300%
Russell 1000 Energy NYSE: ERX
Russell 1000 Financial NYSE: FAS
Russell 1000 Technology NYSE: TYH
Sector Inverse Leveraged 300%
Russell 1000 Energy NYSE: ERY
Russell 1000 Financial NYSE: FAZ
Russell 1000 Technology NYSE: TYP
See also
External links
References
- ^ http://www.russell.com/Indexes/characteristics_fact_sheets/us/Russell_3000_Index.asp
