What is the Russell Index?
Key Points
The Russell index is currently the most widely covered index in the capital market.
The Russell index is based on the US market as the original benchmark and focuses on US-listed companies.
The Russell index is compiled using market capitalization weighting, making it one of the best tools for measuring the stock price of small businesses.
Concept Explanation
The Russell index primarily refers to the US index series launched by Frank Russell in 1984 to measure the US market and track the performance of large and small-cap stocks in the US market.
As the index compilation gradually expands, the Russell US index and Russell style index are now combined to cover approximately 10,000 stocks from 63 countries, covering 98% of the investable market worldwide.
According to different indicators such as country, region, industry, and scale, the Russell index has more than 300 classified indices, among which the most important indices are the Russell 1000 Index, Russell 2000 Index, Russell 3000 Index, and so on.
In 2015, the London Stock Exchange Group (LSEG) subsidiary FTSE Russell and Frank Russell jointly launched the FTSE Russell index trademark, with the Russell index belonging to the FTSE Russell index system.
Index features
Compared with traditional US three major indices, the Russell index can better reflect the overall market.
Specifically, the Russell index has the following three characteristics:
First, the core of the Russell US index is the "US nationality". From the beginning of the creation of the Russell index, the original benchmark was the US market and it focused on US-listed companies.
Second, instead of the subjective judgment of the index institution, the Russell index strictly follows market capitalization as the judgment standard and determines the stock's position in the index through weighted averaging. It is one of the best tools for measuring the stock price of small businesses.
Third, the Russell index generates Russell value index, Russell growth index, Russell defensive index, and so on, according to market style, and begins to cover listed companies around the world. The selection style has significant differences.
Index performance
The Russell index can reflect the performance benchmarks of various types of companies and is widely used as a reference benchmark by many fund companies and financial institutions worldwide. Therefore, it often becomes the basis for index-linked products, including various index-tracking funds, derivatives, and ETFs.
Taking the Russell 1000 index as an example.
The Russell 1000 Index is compiled by averaging the stocks of the top 1000 companies in market capitalization from the Russell 3000 Index. The component stocks are recombined every year to ensure a true reflection of the basic situation of the largest listed companies in the US.
From January 1, 2000 to present, the trend of the Russell 1000 Index is as shown in the following figure:
Data source: Wind Information, as of May 23, 2022
Data source: Wind Information, as of May 23, 2022
Since 2022, the Russell 1000 Index has fallen by 18.94%, which is between the Nasdaq (down 27.42%) and the Dow Jones Industrial Average (down 13.97%).
The main ETFs that track the Russell 1000 Index include IWB (iShares Russell 1000 ETF).
Here are the top ten heavy-weighted stocks as of May 19, 2022:
