Russell 2000
Small Cap Outperformance: More Questions Than Answers
Small cap out performance so far in 2008 is baffling. Earnings growth has been weak relative to large caps and valuations are still excessive. Interestingly, EAFE Small Cap Index is underperforming, while its U.S. counterparts are doing well.
Small Caps' Stumble Is A Global Affair
Small caps have trailed the S&P 500 performance by 12-15% since peaking out on a relative basis in the spring of 2006. International small caps have broken down even more decisively on a relative basis.
Weighted Versus Unweighted: Inside The S&P 500
In 2006, the capitalization weighted S&P 500 was up 13.6%, excluding dividends. The average return for the 500 stocks (S&P equally weighted) was up 14.2%.
Large Cap Versus Small Cap
Small caps continue to be the market leaders over large caps. This trend is expected to continue into 2005, as our small cap leadership model has recently improved, and is now rated slightly positive.
Royal Blues….Annual Reconstruction
Ten new components inserted into this list of the 99 stocks with the largest institutional ownership. Smallest turnover in four years. Russell also being rebalanced.
Russell 2000 Reconstitution
Based on recommendations from the investment services industry, Russell will shift the final day of its index reconstitution process to the last Friday in June, which is June 25 this year, instead of the last day in June.
Answering Client Questions
Many of the questions in this month’s issue came from January client meetings in Texas.
Large Cap Versus Small Cap: Inside The S&P 500
Poor performance by large cap technology and nifty fifty type issues had a very negative impact on S&P 500 cap weighted performers for the past three years.
Comparing Small Cap Performance Measures
Small Cap indices performance divergence. Why has the S&P 600 significantly outperformed the Russell 2000 the past two years?
Large Cap Versus Small Cap: S&P 500 Versus Russell 2000
For the third straight year, the Russell outperforms.
Large Cap Versus Small Cap: Inside The S&P 500
Poor performance by Large cap technology issues had a very negative impact on S&P 500 cap weighted performers in 2000.
Small Cap Divergence...Growth Versus Value
The divergence between Small Cap Growth and Value performance continues to widen. It has been all Growth since August 1998.
Internet Impact: Russell 2000
The Russell 2000 currently has an upside warp because of its Internet stock components. Many of these issues are now too big for this small cap measure, but remain in the index until the annual Russell rebalancing on May 31.
Oversupply of Small Cap Orphans?
More than 500 new companies were added to the Russell 2000 at the mid-year index revision. Those issues deleted from the Russell indices become “orphans”.
Big Cap Dominance Warping Performance Measures
Institutions' preference for liquid big caps have made it very difficult for most portfolio managers to keep up with the S&P 500 or the NASDAQ year to date.
Big Cap Versus Small Cap: S&P 500 Versus Russell 2000
The following table compares the performance of the Russell 2000 Index since its inception in 1979 with the S&P 500.
More Comment About the Russell 2000
David Burnett from the Russell organization has provided us with additional information on the index, its current construction and how it might be further modified.
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