The Russell 1000® Index is a type of market capitalization-weighted stock market index. It is made up of 1,000 of the biggest publicly traded companies in the U.S. In general, it is used as a gauge to see how well the overall stock values are fairing in the U.S. stock market.
As a market capitalization-weighted index, the value of the Russell 1000® Index is typically impacted to varying degrees depending on the capitalization value of the many companies included in the index. Companies with the greatest market capitalization, which is typically determined by multiplying the total number of stock shares by the price-per-share value, generally have the greatest impact. For example, if company A has a market cap value of $5 billion U.S. dollars (USD) and company B has a market cap value of $16 billion USD, a change in the share value of company B would have a greater impact on the overall value of the Russell 1000® Index than the same change in the share value of company A.
Typically, for a company to be included in the Russell 1000® Index, it must be considered large cap, meaning the total value of all of its outstanding shares is greater than about $5 billion USD. These companies are generally the top 1,000 large cap companies that are also included the Russell 3000® Index. This larger index is made up of 3,000 publicly traded companies that have the greatest market capitalization values. It is typically thought to make up about 98 percent of the total cap value of all publicly traded U.S. stocks. As a testament to the size of the companies included in the Russell 1000® Index, they make up about 90 percent of the total U.S. market cap value, while the remaining 2,000 companies also included in the Russell 3000® Index only make up about 8 percent.
In addition to being made up of companies that comprise a large majority of the value of U.S. stocks, the Russell 1000® Index also generally covers a wide variety of industries. The companies and sectors included are adjusted about once a year to reflect changing market cap values, but typically include health-care, technology, energy, consumer product and financial services companies. Due to this broad sector inclusion and large market equity share, investment professionals and economists from around the world typically look to the Russell 1000® Index as a guide to the overall performance of the U.S. stock market.
