FTSE Russell builds the Russell 2000 by ranking the largest 3,000 US-listed companies by float-adjusted market cap and taking the bottom 2,000 — i.e. ranks 1,001 to 3,000. Reconstitution happens once a year in late June, with annual rebalances locking in new entrants for twelve months. There is no profitability screen.
S&P Dow Jones Indices builds the S&P SmallCap 600 with a much more selective process: an Index Committee picks 600 names meeting size, profitability (positive trailing-twelve-month earnings), liquidity and float thresholds. Quarterly review.
Why they perform differently
- Profitability filter: the S&P 600 has historically beaten the Russell 2000 over multi-year horizons in part because unprofitable micro-caps get screened out.
- Reconstitution timing: the Russell's rule-bound June rebalance creates predictable arbitrage that hedge funds front-run; the S&P's discretionary process is harder to game.
- Sector mix: Russell 2000 typically has more biotech and unprofitable tech; S&P 600 leans more old-line industrial.
FAQ
Are companies in the S&P 500 also in the Russell 2000?
Generally no — they're in the Russell 1000 (top 1,000 by market cap). A name only enters the Russell 2000 once it falls out of the top 1,000.
Can I build a custom small-cap index with Arithmos?
Yes. Try "US small-caps with positive 12-month earnings, market cap $300M–$3B, 200 names, equal-weighted" and the agent builds it.
