The Pulse

A First in US Volatility Measures

CBOE Russell 2000® Volatility Index(SM) (RVX(SM)) Closes Below VIX for First Time in History of the Index

SEATTLE, WA–(Marketwired – Sep 14, 2015) – As US and global equities continue to ride a roller coaster of global equity market volatility, US stocks have moved sharply lower in August and September-to-date, with a (-8.3%) return on the US large cap Russell 1000® Index and a (-8.2%) return on the US small cap Russell 2000® Index from August 1 through September 4.

And, year-to-date as of September 4, both indexes are in negative territory, with a (-5.0%) return on the Russell 1000 and a (-4.9%) return on the Russell 2000.

Amid the market gyrations, US equity market volatility measures made history in late August, with the CBOE Russell 2000 Volatility Index(SM) (RVX(SM)) price level closing below the CBOE Volatility Index® (VIX®) price level for the first time on Monday, August 24. And this happened on an additional five of the eight subsequent market days through Friday, September 4.

Comparing small-cap vs. large-cap

Comparing the price relationship between these two indexes is a common way for market participants to compare small cap versus large cap risk perceptions. For the last two trading days, the relationship between these two indexes has returned to historical norms, with the RVX closing above the VIX.

  • Russell Rhoads CFA, Director at The Options Institute at CBOE, said:
    “For the first time in the history of tracking the CBOE Russell 2000 Volatility Index (RVX), this implied volatility measure closed at a discount to VIX. The result is the quantification of risk perceptions for large cap stocks being at the highest ever level relative to small caps. The market is currently showing more concern for large cap multinational firms relative to small cap firms. On one hand, this may be surprising as US market concerns about the potential impact of rising rates could increase the perceived risk of US small caps. On the other hand, this shift could be due to the impact of China market volatility on the perceived risk of US large cap global multinationals.”
this shift could be due to the impact of China market volatility on the perceived risk of US large cap global multinationals

Patrick Fay, global head of derivatives for FTSE Russell, said:

  • “The fluctuation in the small cap volatility premium in recent weeks helps illustrate the importance of examining the relative levels of US large cap and small cap volatility indexes to gain better perspective on US equity market volatility. Having the CBOE Russell 2000 Volatility Index, or RVX, in addition to the well-known VIX, provides market participants with valuable tools for assessing market dynamics.”


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