About the Russell 2000 Index
The Russell 2000 Index is a popular benchmark for small-cap stocks in the United States. It tracks the performance of about 2,000 publicly traded companies that have a market capitalization of less than $10 billion. The index is widely used by investors and fund managers who want to diversify their portfolios and gain exposure to the small-cap segment of the market.
The Russell 2000 Index was created in 1984 by Frank Russell Company, a global investment firm that specializes in index-based products and services. The index is part of the Russell 3000 Index, which covers 98% of the US equity market. The Russell 2000 Index represents approximately 10% of the total market value of the Russell 3000 Index.
The Russell 2000 Index is calculated using a market capitalization-weighted methodology, which means that each company's weight in the index is proportional to its market value. The index is rebalanced annually in June, when new companies are added and existing ones are dropped based on their size and liquidity criteria. The index is also adjusted for corporate actions such as mergers, acquisitions, spin-offs, and stock splits.
The Russell 2000 Index is widely regarded as a barometer of the US economy and consumer sentiment, as small-cap companies tend to be more sensitive to changes in business conditions and consumer demand than large-cap companies. The index also reflects the innovation and growth potential of emerging industries and sectors, such as biotechnology, renewable energy, and e-commerce.
The Russell 2000 Index can be accessed through various investment vehicles, such as exchange-traded funds (ETFs), mutual funds, index funds, and futures and options contracts. Some of the most popular ETFs that track the Russell 2000 Index are the iShares Russell 2000 ETF (IWM), the Vanguard Russell 2000 ETF (VTWO), and the SPDR Russell 2000 ETF (TWOK).