Russell U.S. Equity Indexes Construction & Methodology Index Construction Summary Russell produces a family of U.S. equity indexes. The indexes are market cap-weighted and include only common stocks incorporated in the United States and its territories. All U.S. indexes are subsets of the Russell 3000E™ Index, which represents approximately 99% of the U.S. equity market. This is a summary of how these indexes are constructed. We also offer an in-depth description of the index methodology (PDF). Purpose   Act as a performance standard for active managers. Serve as a proxy for asset allocation purposes. Become a purchasable and replicable vehicle for passive investment strategy. Determining Index Membership   Rank the U.S. common stocks from largest to smallest market capitalization at each annual reconstitution period (May 31). Top 3,000 stocks become the Russell 3000® Index. Largest 1,000 stocks become the Russell 1000® Index. Next 2,000 stocks become the Russell 2000® Index. The smallest 1,000 in the Russell 2000 Index plus the next smallest 1,000 comprise the Russell Microcap Index Determining Style Index Membership   Rank each stock in the Russell 1000 and Russell 2000 by two variables: the book-to-price ratio and the I/B/E/S forecast long-term growth mean. Combine variables to create a composite value score (CVS) for each stock. Rank the stocks by their CVS and apply a non-linear probability algorithm to the distribution to determine style membership weights. Roughly 70% are classified as all value or all growth and 30% are weighted proportionately to both value & growth. Exclusions   Stocks trading below $1.00. Pink sheet and bulletin board stocks. Closed-end mutual funds, limited partnerships, royalty trusts, etc. Non-U.S. incorporated stocks, foreign stocks, American Depositary Receipts (ADRs). Adjustments   Adjust shares outstanding for cross ownership and privately held shares to reflect shares available for trading. Adjust book value due to FAS 106 & 109 write-offs when determining price-to-book ratio for style classification. Maintenance   Stocks deleted between reconstitution dates are not replaced. Spin-offs and Initial Public Offerings are the only additions between reconstitution dates. Dividends are reinvested on the ex-date.			Russell Indexes membership lists U.S. Indexes Printer friendly version of this page

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