One of my favorite questions to baffle college students with is, “How many stocks are in the Russell 2000?” According to Bloomberg and my summer intern who was sent to the trading floor on Friday to get the number there are currently 1941 stocks in the Russell 2000. So why the number below 2000? It relates to the method Russell Indexes uses to construct their indexes.
Russell Investments believes that frequently changing the components of an indication increases turnover costs for portfolios without any resulting benefits. Therefore once a year the indexes get a makeover that is referred to as the Russell Indexes Reconstitution which occurs over a few weeks in June each year. The changes to indexes between the annual reconstitution consist of eligible initial public offerings that are added on a quarterly basis.
The annual process runs over the course of a few weeks and actually started back on May 31. On the last day of May the market cap of each company is determined and these companies are ranked. The result is a list of the 3000 largest companies by market cap. The top 1000 will comprise the Russell 1000 and the Russell 2000 Index will be made up of the bottom 2/3rds of the stocks on the Russell 3000 list. The next step is a preliminary list with the additions and deletions from the index being indicated. This occurred on Friday June 14th and the changes to the list of 3000 stocks can be found at the following link –
Adjustments to this list will be announced this coming Friday and then the final components of the Russell Indexes will be revealed on Friday June 28th with the next index calculations going into effect on July 1. As the process is just getting under way we plan on following the performance of some key additions and deletions along with covering changes to the other Russell Indexes that will be implemented this month.