At the end of this month Russell Indexes will complete the annual rebalncing of its Micro Cap Index. Russell rebalances all of it indexes annually to ensure "accurate representation of the ever-changing market". While OTC issuers are not included in the Index, often newly up-listed NASDAQ and NYSE Mkt companies are added to the Russell Microcap® Index. IPOs are added to the Index quarterly so the majority of additions to the Index during reconstitution are recent up-lists or very small listed companies that have breached the "next 1,000 smallest eligible securities by market cap" threshold in the previous year.
What is the Russell Microcap® Index?
"The Russell Microcap® Index measures the performance of the microcap segment of the U.S. equity market. Microcap stocks make up less than 3% of the U.S. equity market (by market cap) and consist of the smallest 1,000 securities in the small-cap Russell 2000® Index, plus the next 1,000 smallest eligible securities by market cap. The Russell Microcap Index is constructed to provide a comprehensive and unbiased barometer for the microcap segment trading on national exchanges." - Russell Microcap® Index Fact Sheet
Why Annual Reconstitution?
"Because markets change. We believe indexes should represent the investable opportunity set. In order to accomplish this in a changing market landscape, Russell implements annual reconstitution, an unbiased process designed to capture changes across global market segments. Reconstitution keeps company size and style changes relevant within the indexes, preventing unintended drift from affecting results, and providing a valuable tool for asset allocation and performance analysis." - Russell Index Reconstitution Overview