Welcome!

News Feed Item

Small Cap Volatility: "Small Cap Premium," or Difference in Implied Volatility Between U.S. Small Cap and U.S. Large Cap Stocks, Was Much Higher in April and May 2014 Relative to Full-Year 2013, According to the CBOE Russell 2000 Volatility Index and CBOE

SEATTLE, WA -- (Marketwired) -- 06/10/14 -- For April and May, implied volatility for the U.S. small cap equity market as reflected by closing prices for the CBOE Russell 2000 Volatility Index(SM) (RVX(SM)) increased and as of May 30 was significantly higher than large cap volatility as measured by the CBOE Volatility Index® (VIX®).

Small cap volatility is almost always higher than large cap volatility. This "premium" averaged 28% in 2013. However, for April and May 2014 the premium averaged 50% with average RVX level of 20.00 and VIX level of 13.34. And as of Friday, May 30, RVX was 17.74 and VIX was 11.40, a premium of 56%.

"In 2013 the Russell 2000® Index outperformed other domestic market indexes such as the Russell 1000® Index and RVX was lower to reflect this outperformance," said Russell Rhoads, CFA and instructor with The Options Institute at the Chicago Board Options Exchange. "This year as of May 30, the Russell 2000 Index has underperformed other U.S. equity market indexes and RVX has been elevated to reflect investor's increased risk perception for small cap stocks."

"We have seen market turbulence and an increase in volatility amid an approximately 10% correction in March through May of this year for the U.S. small cap market as reflected by the Russell 2000 Index. Forward expectations for U.S. small cap volatility as compared to large cap volatility, as reflected by the relative levels for RVX and VIX, have risen significantly since the beginning of the year," said David Koenig, CFA, FRM, index investment strategist with Russell Investments. "This underscores the value of having a diverse set of index-based tools to measure relative market returns and volatility."

In late June, Russell will undergo its annual indexes reconstitution. At reconstitution, the entire Russell family of global indexes, including the Russell 2000 Index on which the RVX is based, will be rebalanced and the ranges within and breakpoints between U.S. large and small-cap stocks will be adjusted to reflect the current market environment.

For more information on the CBOE Russell 2000 Volatility Index, go to the Russell Indexes website or CBOE Russell 2000 Volatility Index microsite.

              Volatility Indexes: Average Daily Closing Prices

---------------------------------------------------------------------------
                               Apr - May 2014           Jan - Dec 2013
---------------------------------------------------------------------------
           RVX                      20.0                     18.1
---------------------------------------------------------------------------
           VIX                      13.3                     14.2
---------------------------------------------------------------------------
     RVX/VIX Premium                50%                      28%
---------------------------------------------------------------------------

Source: Russell Investments & CBOE. Calculations are daily closing prices of the CBOE Russell 2000 Volatility Index divided by number of market days for each period. CBOE and VIX are registered trademarks of the Chicago Board Options Exchange; S&P 500 is a registered trademark of Standard & Poor's Corporation.

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.

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.

Opinions expressed by Mr. Koenig and Mr. Rhoads reflect market performance as of May 30, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance.

Forecasting is inherently uncertain and may be incorrect. It is not representative of a projection of the stock market, or of any specific investment.

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.

Copyright © Russell Investments 2014. All rights reserved.

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.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
SYS-CON Events announced today that Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Juniper Networks challenges the status quo with products, solutions and services that transform the economics of networking. The company co-innovates with customers and partners to deliver automated, scalable and secure network...
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
SYS-CON Events announced today that SD Times | BZ Media has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. BZ Media LLC is a high-tech media company that produces technical conferences and expositions, and publishes a magazine, newsletters and websites in the software development, SharePoint, mobile development and commercial UAV markets.
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and management into a ...
Historically, some banking activities such as trading have been relying heavily on analytics and cutting edge algorithmic tools. The coming of age of powerful data analytics solutions combined with the development of intelligent algorithms have created new opportunities for financial institutions. In his session at 20th Cloud Expo, Sebastien Meunier, Head of Digital for North America at Chappuis Halder & Co., will discuss how these tools can be leveraged to develop a lasting competitive advanta...
Building custom add-ons does not need to be limited to the ideas you see on a marketplace. In his session at 20th Cloud Expo, Sukhbir Dhillon, CEO and founder of Addteq, will go over some adventures they faced in developing integrations using Atlassian SDK and other technologies/platforms and how it has enabled development teams to experiment with newer paradigms like Serverless and newer features of Atlassian SDKs. In this presentation, you will be taken on a journey of Add-On and Integration ...
Now that the world has connected “things,” we need to build these devices as truly intelligent in order to create instantaneous and precise results. This means you have to do as much of the processing at the point of entry as you can: at the edge. The killer use cases for IoT are becoming manifest through AI engines on edge devices. An autonomous car has this dual edge/cloud analytics model, producing precise, real-time results. In his session at @ThingsExpo, John Crupi, Vice President and Eng...
There are 66 million network cameras capturing terabytes of data. How did factories in Japan improve physical security at the facilities and improve employee productivity? Edge Computing reduces possible kilobytes of data collected per second to only a few kilobytes of data transmitted to the public cloud every day. Data is aggregated and analyzed close to sensors so only intelligent results need to be transmitted to the cloud. Non-essential data is recycled to optimize storage.
"I think that everyone recognizes that for IoT to really realize its full potential and value that it is about creating ecosystems and marketplaces and that no single vendor is able to support what is required," explained Esmeralda Swartz, VP, Marketing Enterprise and Cloud at Ericsson, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" ...
As businesses adopt functionalities in cloud computing, it’s imperative that IT operations consistently ensure cloud systems work correctly – all of the time, and to their best capabilities. In his session at @BigDataExpo, Bernd Harzog, CEO and founder of OpsDataStore, will present an industry answer to the common question, “Are you running IT operations as efficiently and as cost effectively as you need to?” He will expound on the industry issues he frequently came up against as an analyst, and...
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
After more than five years of DevOps, definitions are evolving, boundaries are expanding, ‘unicorns’ are no longer rare, enterprises are on board, and pundits are moving on. Can we now look at an evolution of DevOps? Should we? Is the foundation of DevOps ‘done’, or is there still too much left to do? What is mature, and what is still missing? What does the next 5 years of DevOps look like? In this Power Panel at DevOps Summit, moderated by DevOps Summit Conference Chair Andi Mann, panelists l...
In their Live Hack” presentation at 17th Cloud Expo, Stephen Coty and Paul Fletcher, Chief Security Evangelists at Alert Logic, provided the audience with a chance to see a live demonstration of the common tools cyber attackers use to attack cloud and traditional IT systems. This “Live Hack” used open source attack tools that are free and available for download by anybody. Attendees learned where to find and how to operate these tools for the purpose of testing their own IT infrastructure. The...
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...