The volatility of the small capitalization stocks in the US saw a steeper drop than that of their larger counterparts last week, as the Fed lowered interest rates for the third time this year. The risk of the Russell 2000 fell 90 basis points over the past five days, while that of the Russell 1000 dropped about 60 basis points, as measured by Axioma’s US Small Cap and All Cap short-horizon fundamental models, respectively. The Russell 2000 saw a total drop of 190 basis points over the past month—more than double that of the Russell 1000 for the same period. Small Caps’ risk of 15.7% was only 2 percentage points higher than that of large caps as of last Thursday.
Nonetheless, the trading volume of the Russell 2000 remained below 24 billion, and close to the six-month low reached the prior week. Trading activity in the Russell 1000 rose somewhat, but also remained low when compared with prior levels.
See graphs from the US Small Cap Equity Risk Monitor as of 31 October 2019: