The Russell 2000 Index is a widely recognized stock market index that measures the performance of 2,000 of the smallest companies within the Russell 3000 Index. Launched in 1984 by the Frank Russell Company, it serves as a key benchmark for small-cap stocks in the United States, reflecting the dynamic and diverse nature of this market segment. The index is derived from the broader Russell 3000, which includes the largest 3,000 publicly traded companies in the U.S. by market capitalization. The smallest 2,000 companies within this universe make up the Russell 2000, ensuring a comprehensive representation of small-cap stocks across various industries.

The Russell 2000 is a market capitalization-weighted index, meaning each company’s weight in the index is proportional to its market value. Larger small-cap companies have a greater influence on the index’s performance, while smaller companies have a relatively lesser impact. This weighting method helps maintain the index’s focus on the overall performance of the small-cap sector. The index undergoes an annual reconstitution, typically in June, during which it is reviewed and adjusted to reflect changes in the market. Companies that have grown significantly may move up to the Russell 1000, which includes the largest 1,000 companies, while new companies that qualify as small-cap are added to the Russell 2000. This rebalancing ensures the index remains current and accurately represents the small-cap market segment.

The Russell 2000 Index is extensively used by investors, analysts, and fund managers to gauge the performance of small-cap stocks. It serves as a benchmark for small-cap mutual funds and exchange-traded funds (ETFs), offering a practical tool for tracking investment performance and market trends within the small-cap arena. Its comprehensive coverage and methodical rebalancing make it a crucial indicator for understanding the opportunities and dynamics of smaller companies in the U.S. market.