Russell 3000 Value Index: Definition, Functionality, and Insights

Adam Hayes, Ph.D., CFA, brings over 15 years of Wall Street experience as a derivatives trader. Beyond his expertise in derivatives, Adam specializes in economics and behavioral finance. He earned his master's degree in economics from The New School for Social Research and his Ph.D. in sociology from the University of Wisconsin-Madison. A CFA charterholder with FINRA Series 7, 55, and 63 licenses, Adam currently conducts research and teaches economic sociology and finance at Hebrew University in Jerusalem.

What Is the Russell 3000 Value Index?

The Russell 3000 Value Index is a market-cap weighted stock index maintained by the Russell Investment Group, derived from the Russell 3000 Index. It tracks the performance of U.S. stocks classified as value stocks, emphasizing those with lower price-to-book ratios and expected growth rates.

This index offers a contrast to the Russell 3000 Growth Index by focusing exclusively on value-oriented equities.

Key Highlights

• The Russell 3000 Value Index consists of companies from the comprehensive Russell 3000 index identified as value stocks.
• Value stocks typically trade at lower prices relative to their fundamentals and often provide higher dividend yields, appealing to value-focused investors.
• The index undergoes annual reconstitution to maintain its focus on value stocks.

How the Russell 3000 Value Index Works

Based on the Russell 3000 Index—which measures the performance of the 3,000 largest publicly traded U.S. companies by market capitalization—the Russell 3000 Value Index segments the market by size and investment style. This segmentation helps investors analyze broad market trends, portfolio exposure, and cost structures.

Launched on July 1, 1995, the index selects companies based on float-adjusted market capitalization. Each May’s final trading day, FTSE Russell ranks eligible stocks by total market cap. The index is then rebalanced on the last Friday of June. Eligible securities must trade on NYSE, NYSE MKT, NASDAQ, or ARCA exchanges. Investors can track the index’s performance using the iShares Core U.S. Value ETF (ticker: IUSV).

Value stocks are characterized by trading at prices below what their financial performance might suggest, presenting opportunities to exploit market inefficiencies. Typical traits include high dividend yields, low price-to-book ratios, and low price-to-earnings ratios. One popular approach for identifying value stocks is the "Dogs of the Dow" strategy, which involves investing in the ten highest dividend-yielding Dow Jones stocks annually.

In contrast, growth stocks represent companies with significant expected expansion potential.

Overview of Russell Indices

The Russell 3000 Index covers approximately 98% of the U.S. public equity market. As of January 31, 2021, its weighted average market capitalization was about $125 billion, with a median of $2 billion. Established on January 1, 1984, the index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

The Russell 3000 is subdivided into the Russell 1000 and Russell 2000 indices. To determine growth and value classifications within these subsets, Russell Investment Group ranks stocks based on their book-to-price ratios and long-term growth forecasts from the Institutional Brokers' Estimate System (IBES).

Stocks receive a ranking that guides their classification: higher ranks typically indicate value stocks, while lower ranks suggest growth stocks. Some stocks exhibit characteristics of both styles.

Note: This content is for informational purposes only and does not constitute tax, investment, or financial advice. Investing involves risks, including potential loss of principal.

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