Russell 2000

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The Russell 2000® Index has become the standard benchmark for small-cap stock performance on U.S. markets. The Russell 2000 represents the bottom two-thirds of companies in the Russell 3000 Index and make up about 10% of its market capitalization of around $1 billion, whereas the larger-cap Russell 1000 Index, consisting of the largest 1,000, contributes 90% of Russell 3000's market cap.

Brief background

The Russell 2000 and other members of the Russell index family were created in 1984 by asset manager Frank Russell Company (now Russell Investments) as "a better measurement of money manager success".[1] It is now the most widely-quoted benchmark for small-cap stock performance in the U.S.[2] and recently went international as the U.S. small-cap component of the Russell Global Index launched last year.

Trading and investing

The Russell 2000 Index is very popular with equity investors, including active traders, because it contains smaller (market cap $100m-$1b), more volatile stocks trading with high liquidity and low costs.[3] Typical vehicles for trading the Russell 2000® are exchange-traded funds (ETFs) like the low-cost iShares Russell 2000 Index (IWM),[4] and the Mini-Russell 2000 Index, traded on the International Securities Exchange (ISE) and based on one-tenth of the full value.[5]

Trading derivatives of the Russell 2000 Index has expanded rapidly in recent years and created trading shakeups along the way. The CME Group recently lost its right to trade such contracts to the upstart IntercontinentalExchange (ICE), which recently posted contract specifications for its ICE Russell 2000 Index futures and launched exclusive trading of Russell index contracts in September 2008.[6] CME will instead offer e-mini futures trading of the Russell 2000's main competitor, the S&P SmallCap 600 Index. ICE's subsidiary, the New York Board of Trade (NYBOT) also trades Russell 2000-based futures and options.[7]

References

  1. ↑ Corporate Timeline. Russell Investment Group. Retrieved on April 29, 2008.
  2. ↑ Russell 2000 Index. fool.com. Retrieved on April 29, 2008.
  3. ↑ Russell 2000 Index. StreetAuthority.com. Retrieved on April 29, 2008.
  4. ↑ iShares Russell 2000 Index. Google Finance. Retrieved on April 29, 2008.
  5. ↑ Mini-Russell 2000 Index. International Securities Exchange. Retrieved on April 29, 2008.
  6. ↑ ICE Poaches Russell futures contracts from CME. Index Universe. Retrieved on April 29, 2008.
  7. ↑ Russell 3000 Index - The Measure of the U.S. Equities Market. FuturesTraining.com. Retrieved on April 29, 2008.
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