DEFINITION of 'Russell Microcap Index'
A capitalization weighted index of 2,000 small cap and micro cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks. The broad index is designed to present an unbiased collection of the smallest tradable securities that still meet exchange listing requirements, so over-the-counter (OTC) stocks and pink sheet securities are excluded.
The Russell Microcap Index is recalculated annually to prevent growing stocks from distorting index performance, and to include new entrants.
BREAKING DOWN 'Russell Microcap Index'
While the Russell 2000 is the most commonly quoted small cap index, the Microcap Index is a valuable tool for examining trends in smaller, startup companies. Membership changes much more on an annual basis than in the larger indexes that cover mid cap and large cap stocks. The Microcap Index represents just 3% of the overall U.S. equity market by capitalization.
Investors can purchase an ETF that replicates the Russell Microcap Index from iShares, which trades under the ticker "IWC".