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Russell 1000 Index Trading

Russell 1000 - Description


Russell 1000 Index Fundamentals

The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92 percent of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $13 billion; the median market capitalization was approximately $3.8 billion. The smallest company in the index had an approximate market capitalization of $1.4 billion.

A series of indexes was developed jointly by the Frank Russell Company and the New York Futures Exchange (NYFE) to represent investment-grade equities. While theS&P 500 represents approximately 75 percent of the investment-grade stocks held by most institutional investors, the Russell 1000, 2000, and 3000 indexes track almost 99 percent of the stocks included in portfolios of institutional investors.

Small Cap Stocks Relate to Russell Indexes

Even with more than 6,000 publicly traded U.S. stocks, the Russell 3000 Index confines itself to the 3,000 most actively traded shares and is divided into the Russell 1000 and Russell 2000 sub-indexes. The Russell 1000 Index represents the price of the top tier of the domestic equity market, or companies with market values greater than $300 million, which usually comprise approximately 90 percent of the market. The Russell 2000 Index represents the second tier of U.S. equities, or companies with market values between $20 million and $300 million, which account for approximately 8 to 9 percent of the total market.

How the Russell 1000 Index is Determined

The Russell 1000, 2000, and 3000 indexes are capitalization-weighted, and adjustments are made for cross-ownership. For example, if IBM owns 20 percent of Intel, the index includes only 80 percent of Intel's outstanding shares. Also, all three indexes exclude non-U.S. stocks, both ADRs and the ordinary shares that are traded on U.S. stock exchanges. The base level for all three indexes was set at 100 in 1979.

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