SOURCE: Russell Investments

Russell Investments

March 11, 2015 09:46 ET

U.S. Small & Large Cap Indexes Reflect YTD Changes in Relative Performance & Volatility for Small & Large Cap U.S. Stocks; Russell 2000® Index & CBOE Russell 2000 Volatility Index(SM)

CBOE Options Expert Notes Narrowing Premium Between Small- and Large-Cap Volatility Indexes

SEATTLE, WA--(Marketwired - Mar 11, 2015) -  U.S. small cap stocks have exhibited stronger relative performance and lower relative volatility to U.S. large cap stocks in 2015 year-to-date as of March 6, according to Russell Indexes.

  • In 2015 year-to-date as of March 6, the U.S. small cap Russell 2000® Index gained 1.2%, underperforming the U.S. large cap Russell 1000® Index by just .2%. This compares to 2014, where the Russell 2000 Index returned 4.9%, underperforming the Russell 1000 Index (13.2%) by more than 8%.
  • The premium for the implied volatility of U.S. small cap stocks, as measured by the CBOE Russell 2000 Volatility Index(SM) (RVX(SM)), to the implied volatility of U.S. large cap stocks, as measured by the CBOE Volatility Index® (VIX®), has also been lower in 2015 year-to-date relative to full-year 2014. In 2014, U.S. small cap implied volatility was at a 36.8% average premium to U.S. large cap implied volatility. In 2015 year-to-date as of March 6, this average premium has narrowed to 25.7% and is now at 23.6% for March to-date as of March 6.

Russell Rhoads, CFA -
Senior Instructor, The Options Institute at CBOE
"U.S. small cap stocks have traditionally tended to reflect U.S. domestic demand more than large cap U.S. stocks, which are often more multi-national. As a result, indices which reflect U.S. small cap stocks performance and volatility have tended to exhibit different characteristics than indices which reflect U.S. large cap stock performance and volatility. And, in recent months, the narrowing gap between the small cap and large cap volatility indexes suggests a lowering risk perception by investors toward U.S. small cap stocks. This has created additional insight for investors and underscores the value of adding a volatility index to their toolset. For this and other reasons, we see growing interest in the CBOE Russell 2000 Volatility Index(SM)." 

For more information on the Russell 2000® Index and the CBOE Russell 2000 Volatility Index(SM), go to the Russell Indexes website as well as the CBOE RVX microsite.

Source: Russell Investments & CBOE. Total returns, US dollar denominated. Year-to-date volatility calculations are daily closing prices of the CBOE Russell 2000 Volatility Index and the CBOE Volatility Index divided by number of days. CBOE and VIX are registered trademarks of the Chicago Board Options Exchange.

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.

The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its respective indexes.

Opinions expressed by Mr. Rhoads reflect market performance as of March 6, 2015 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance. 

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.

Russell Investments is an independent organization and is not affiliated with the Chicago Board Options Exchange (CBOE) or Standard & Poor's (S&P).

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