Skip to main content

You are here

Blog Listing Page

Index IDEA: Russell US Indexes Reconstitution; CBOE and FTSE Russell Address Volatility Myth

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.

 

-------------

© 2017 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 TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks 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, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Russell Rhoads and Ron Bundy are as of June 21st and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

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 results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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 index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.

Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

Blog Listing Page