SOURCE: Russell Investments

Russell Investments

February 14, 2014 10:00 ET

Small Cap Volatility: U.S. Small Cap Equity Market Expected Volatility Has Trended Upward in Recent Weeks as of Feb 10, According to the CBOE Russell 2000® Volatility Index (RVX(SM)); Russell Market Experts Continue to see a Potential Opportunity for Active Management in U.S. Small Caps

SEATTLE, WA--(Marketwired - Feb 14, 2014) - Since reaching an all-time low closing level of 13.65 on March 14, 2013, the CBOE Russell 2000 Volatility Index (RVX) continued to test all-time lows throughout 2013 and into 2014, but has seen a steady increase in recent weeks. The Index closed above 20 on January 24, hit 27.19 on February 3 (its highest close since June 2012) and has remained elevated, closing at 21 on February 10, 2014. In addition, trading in Russell 2000 Index-based futures and options has increased since the beginning of 2014, with over 3,200 combined open contracts as of February 10, 2014*.

"Consistent with global risk assets, the RVX captured the increased volatility within U.S. small caps in recent weeks. We view this as a market that is looking for economic signals to validate and support last year's near historic returns," said Steve Wood, chief markets strategist with Russell Investments. "That said, we do see potential opportunity in small caps, but as with other asset classes success in the small cap market will likely depend on strong stock picking, suggesting the potential opportunity for active management."

The CBOE Russell 2000 Volatility Index(SM) (RVX(SM)) measures market expectations of near-term volatility conveyed by Russell 2000 Index options prices. It measures the market's expectations of 30-day volatility implicit in the prices of near-term Russell 2000 Index options. The RVX is a leading barometer of investor sentiment and market volatility relating to the U.S. small cap equity market.

For more information on small cap equities and the RVX and to see a copy of Russell Indexes new Small Cap Perspectives quarterly report, go to the Russell Investments website.

*Source: Options Clearing Corporation. CBOE Russell 2000 Volatility Index closing values from CBOE.

The Russell Global Index measures the performance of the global equity market based on all investable equity securities, and is constructed to provide a comprehensive and unbiased barometer for the global segment, The Index includes more than 10,000 securities in 47 countries, and covers 98% of the investable global market. All securities in the Russell Global Index are classified according to size, region, country and sector; as a result the index can be segmented into more than 300 distinct benchmarks.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index. 

Small capitalization (small cap) investments involve stocks of companies with smaller levels of market capitalization (generally less than $2 billion) than larger company stocks (large cap). Small cap investments are subject to considerable price fluctuations and are more volatile than large company stocks. Investors should consider the additional risks involved in small cap investments.

Opinions expressed by Mr. Wood reflect market performance as of February 10, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance. 

This material is not an offer, solicitation or recommendation to purchase any security.

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

CBOE®, Chicago Board Options Exchange® and CBOE Volatility Index® and VIX® are registered trademarks of the Chicago Board Options Exchange, Incorporated (CBOE). Russell 2000® is a registered trademark of Russell Investments, used under license.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.