Russell 2000 Index

Not only the largest companies are listed on the stock market. There are many indexes with different compositions. Furthermore, not all stock market indices list companies, there are indices whose composition is also made up of bonds, raw materials or other types of assets.

The Russell 2000 dates back to 1984, when it was founded by the Frank Russell Company along with other indices: the Russell 1000 and Russell 3000.

The best-known index of these three is undoubtedly the Russell 2000. An index that is used as a reference in the United States for companies and investment funds of a small size. See Bencharmk

Components of the Russell 2000 Index

The Russell 2000 is made up of the 2000 companies with the lowest capitalization in the Russell 3000 index. Despite the fact that these are 2000 companies compared to 1000 large capitalization, the relative weight of the Russell 2000 in the Russell 3000 is around the 8%.

That is, the market capitalization of the Russell 2000 is equivalent to 8% of the total market capitalization of the Russell 3000.

The criterion for selecting the companies that are part of the index is market capitalization. For its part, the weight in the index of the different companies that comprise it is ordered in turn by market capitalization. See market capitalization

So those companies with a larger capitalization will have more weight in the index. While listed companies that have a lower capitalization will have a lower weight in the Russell 2000 index.

US economy benchmark

Many stock analysts and economists consider the Russell 2000 to be an index that goes beyond the stock market. In his opinion, as it is made up of small, small and medium-sized companies, its results better reflect the behavior of the US economy.

Obviously this makes sense. Large companies often have part of their business outside the country. In this case, outside the United States. For example, a company like Apple sells its products around the world. However, smaller companies tend to have their business focused on the nation.

Russell 2000 and S&P 500

Both the Russell 2000 and the S&P 500 are two very important indices worldwide, but especially at the United States level. If we said that the Russell 2000 represents those smaller companies, the S&P 500 represents the opposite. That is, it represents those companies with the highest market capitalization (the largest).

In this sense, an index similar to the Russell 2000 but created by Standard & Poor’s (the agency that creates the S&P 500 index) is the S&P 600. However, despite the fact that the S&P 500 is probably the index most followed by the world, in the case of the S&P 600 is different. Thus, the Russell 2000 is considered much more important and as a reference.