Skip to main content

You are here

Blog Listing Page

Index IDEA: Small cap volatility at record lows relative to large caps

In a small cap-led US equity market where the Russell 2000 Index has risen 9.6% relative to a 5.2% rise for the US large cap Russell 1000 Index as of June 11, the year-to-date volatility differential between small and large cap US stocks is at an all-time low, according to new research from Cboe Global Markets (Cboe®) and FTSE Russell.

A recent study by Cboe has found that the “small cap premium,” or the difference between perceived US small cap volatility and US large cap volatility as reflected by average daily closing prices of the Cboe Russell 2000 Volatility Index (RVXSM) and the Cboe Volatility Index® (VIX® Index), is at the lowest point since it was first measured in 2004.

Russell Rhoads, CFA, director, product advancement, Cboe global markets

“The ‘small cap premium’ can be an effective way to measure investors’ perceptions of the volatility of US large cap stocks relative to US small cap stocks. On average, small caps are historically more volatile than large caps, but this relative measure has been known to ebb and flow from year-to-year since we began measuring this important statistic in 2004. At 10.3% year-to-date, we are seeing a huge outlier for the ‘small cap premium’ and certainly a reflection of the market conditions we have seen so far this year.” 

Alec Young – managing director, global markets research, FTSE Russell

“With many of 2018’s equity headwinds being international in nature, the Russell 2000 Index has outperformed the Russell 1000 Index due in large part to small caps’ lower international sales exposure. Being more domestic has insulated small caps from trade tensions, geopolitical worries and the earnings drag stemming from a stronger dollar. Being less global also gives small caps more exposure to several positives within the US, including tax reform, increasing deregulation and faster economic growth relative to weaker recoveries in Europe and Japan. All these tailwinds are helping drive faster profit growth for small cap companies relative to their blue chip counterparts, helping fuel YTD leadership while tempering relative volatility for this asset class.”

FTSE Russell will complete the annual reconstitution of the Russell US Indexes, which includes the annual rebalance of the US small cap Russell 2000 Index, after the close of the US equity markets on Friday, June 22. You can learn more about Russell Reconstitution on the FTSE Russell website.


© 2018 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE GDCM”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE GDCM, MTS Next Limited, Mergent, FTSE FI and YB. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “WorldBIG®”, “USBIG®”, “EuroBIG®”, “AusBIG®”, “The Yield Book®”,  and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE GDCM, Mergent,  FTSE FI or YB. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.

All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of the FTSE Russell Products or the fitness or suitability of the FTSE Russell Products for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell Products is provided for information purposes only and is not a reliable indicator of future performance.

Views expressed by Alec Young of FTSE Russell and Russell Rhoads of Cboe  are as of June 14th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell, Cboe or the LSE Group.

No responsibility or liability can be accepted by any member of the LSE Group, Cboe nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this communication or links to this communication or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group or Cboe is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.

No member of the LSE Group, Cboe nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this communication or accessible through FTSE Russell Products, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE GDCM, MTSNext, Mergent, FTSE FI, YB and/or their respective licensors.

Cboe®, Chicago Board Options Exchange®, Cboe Volatility Index®, and VIX®  are registered trademarks of Chicago Board Options Exchange, Incorporated (Cboe). RVX is a service mark of Cboe. This data is believed to be correct but Cboe does not guarantee the accuracy of the data and will not be held liable for consequences of its use. 

Blog Listing Page