The Frank Russell Co developed the Russell 2000 index to track the performance of a much broader number of companies than the more famous S&P 500. It launched this index with many of its others in 1984. It's a small cap index. It's comprised of the lower 2000 companies in the Russell 3000 index, which tracks the largest 3000 companies in the entire U.S. market.
Although this small-cap index has two out of three companies in the Russell 3000, their combined market caps are only 8% of the total of the parent index.
Its median market cap is $397,000,000. The largest company's market cap is $5,959,000,000.
Therefore, this index will perform well during stock markets that favor small cap companies over the large cap. Its ticker symbol is ^RUT.
You can also trade futures contracts on the Russell 2000. E-mini futures are available and popular with day traders. These e-mini contracts went from 1,000 contracts a day in 2002 to over 42,000 daily by March 2004.
This index measure small cap companies in two categories -- growth and value. The average market cap is about 1/20 of the S&P 500 company average.
This index is now the second most-commonly used equity index in the United States. It's by far the most commonly used small-cap stock index.
A full-sized futures contract of this index is priced at $500 per point. The e-mini futures are priced at $100 per point.
By comparison, the S&P 500 full-sized futures contract is priced at $250 per point. The S&P 500 e-mini futures is priced at $50 per point.
The top ten companies in this index are: Human Genome Sciences, Tupperware, 3Com, E*Trade Financial, Assured Guaranty, Solera Holdings, Skyworks Solutions, Highwoods Properties, DOMTAR, and Informatica.
You can invest using this index by purchasing one of the exchange traded funds devoted to it, which are managed by iShares, ProShares, Direxionshares and RydexShares.
This index is a weighted average. That means that it's compiled by multiplying each company's current market price per share times the number of outstanding shares. Therefore, the bigger companies -- which have many more shares outstanding than the smaller companies -- have a much bigger impact on the index's total value than the smaller companies. All major indexes, except the Dow Jones Industrial Average, are weighted.
Therefore, the Russell 2000 should be better known to investors than it is, because it represents an important growth area of the overall economy. Every large-cap stock was once a small-cap stock.
Autor: Richard Stooker
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Added: February 9, 2010
Source: http://ezinearticles.com/