Russell Reconstitutes US Indexes

June 10, 2002 ( - Frank Russell Company has posted its preliminary lists of companies that will join or leave the broad-market Russell 3000 Index when the firm reconstitutes its family of 21 unmanaged US equity indexes this month.

Final index membership will go into effect July 1 and remain in place for one year.

Russell indexes are reconstituted annually.  That process takes the 3,000 largest US stocks as of the end of May and ranks them by total market capitalization.  The largest 1,000 firms in the resulting Russell 3000 become the Russell 1000, while the remaining companies become the Russell 2000.

Last year, the Russell 2000 added 609 companies and shed 431. In fact, over the last four years, the index has not had 2000 stocks, according to CBSMarketWatch – which notes that this year it is technically the Russell 1880.

The preliminary “additions” list for 2002 indicates 66 initial public offerings compared with 148 in 2001 – and 2000’s record setting 317.

Only 19 IPOs are likely to join the large-cap Russell 1000 index this year, down from 86 in 2000.

Russell notes that 397 companies are on tap to be added to the Russell 3000, significantly fewer than the 10-year average of 495. The total market value of the index will likely reach $12.1 trillion in total capitalization, which means the U.S. market shed about $300 billion from this time last year and a total of $2.5 trillion since July 2000.

Updates to the reconstitution lists will be posted this Friday, June 14, and again on June 21.  Final membership lists for the Russell 3000, Russell 2000, and Russell 1000 will be posted July 9.

Russell’s index methodology excludes limited partnerships, limited liability companies, royalty trusts, closed-end investment management companies, ADRs, preferred stock, pink-sheet companies, OTC bulletin board companies, and warrants and rights.

The indexes do not include stocks trading below $1 at rebalancing, but real estate investment trusts and IPOs are eligible. Issuers also must be US-domiciled (incorporated.)

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