As global index provider FTSE Russell nears the final day of the annual reconstitution for its Russell US Indexes, new research from CBOE helps counter the misperception that the annual rebalance of approximately $8.5 trillion in investment assets following the Russell US Indexes brings heightened volatility to the US equity markets.
Experts from the Chicago Board Options Exchange (CBOE) recently studied the average closing price for the CBOE Russell 2000®Volatility Indexsm (RVXsm), which measures market expectations of near-term volatility as conveyed by Russell 2000® Index options prices, for each month from 2004 through 2016. The average daily close price for RVX in June ranks eighth out of the 12 months of the year.
Source: Chicago Board Options Exchange (CBOE). Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Russell Rhoads, Director of Education, CBOE Options Institute:
“We are very interested in how the annual reconstitution process for the Russell 2000® Index impacts volatility. Our historical analysis shows that for relative volatility for the US small-cap index, June is middle-of-the-road at best.”
Ron Bundy, CEO – North America Benchmarks, FTSE Russell:
“We have implemented a series of enhancements to our Russell US Indexes methodology over the years to increase transparency and reduce volatility. Our annual index reconstitution approach, in particular, is designed to limit market volatility around what is traditionally one of the highest volume market events of the year on the US equity exchanges.”
For more information on the Russell US Indexes reconstitution, go to the FTSE Russell website.
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