SOURCE: Russell Investments

Russell Investments

November 25, 2015 09:36 ET

Santa Claus & Small Caps: Russell 2000® Index Historical Returns Suggest Holiday Lift for Small Companies

SEATTLE, WA--(Marketwired - Nov 25, 2015) - US small-cap stocks as measured by the Russell 2000® Index have fallen 1.3% year-to-date in 2015 as of November 20 relative to a 3% increase for the US large-cap stocks as measured by the Russell 1000® Index for the same period. However, history suggests that small-cap watchers may want to keep an eye on this asset class for the remainder of the year.

US small-cap stocks have had a positive return between November 20 (or closest market day close) and year-end in 18 of the last 20 years. US large-cap stocks have also had great success at year end, also showing a positive return in 18 of the last 20 years. Yet the "Santa Claus Effect" has been more pronounced in small caps versus large caps, with the Russell 2000 averaging a 5.6% increase between November 20 and year-end over the last 20 years compared to a 3.4% average increase in the Russell 1000 over the same time period.

Russell Rhoads, Senior Instructor at the CBOE Options Institute:
"We've seen small caps underperform large caps in the US thus far in 2015, yet historical returns point to some very powerful seasonal trends. Traders or investors who want to take advantage of a perceived 'Santa Claus effect' for US small caps between now and year-end may be considering a variety of approaches including using index-based options."

Rhoads expands on his analysis in this week's "The Week in Russell 2000 Trading" blog on the CBOE Options Hub.

More information on the Russell 2000® Index can be found on the FTSE Russell website.

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