Volatility refers to how much something moves around. If your friend is volatile, they might skip to the car, giddily excited about going out to dinner...only to get swearing-mad in traffic a few minutes later...followed by another quick swing to open weeping when "Cat's In The Cradle" comes on the radio.
Think about a stock that behaves the same way. It's up, then suddenly it's down. Big swings. That's volatility.
Wall Street players can actually bet on volatility. Not betting whether stocks will go up or down. Just that they will make big moves one way or another.
The CBOE Russell 2000 Volatility Index is a vehicle for that kind of bet. When the index rises, it means volatility is on the rise. Think: a tumultuous political situation, or ahead of a contentious Federal Reserve meeting, or in the middle of an uncertain economic situation. When the index is down, things are Even Steven. Not much movement. Everything is pretty much steady as she goes.
The "Russell 2000" part comes in because the volatility is based on the activity of the stocks in the Russell 2000 index. This is an extremely broad index of stock performance. The Dow Jones Industrial Average includes 30 stocks. The S&P 500 includes 500 stocks. The Russell 2000 has that beat by four times. (We've done the math for you...comes out to "2,000").
So the CBOE Russell 2000 Volatility Index looks at volatility across a broad cross section of the equity market.
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Finance: What is the Wilshire 5000?9 Views
finance a la shmoop what is the Wilshire 5000 well it's an index as in index fund
ticker W 5000 well the Wilshire 5000 had the top 5,000 most highly valued US [List of all the stocks in the Wilshire 5000]
stocks in it when it launched you know by the late 90s the index had added
another about 25 hundred names but it didn't change its name to Wilshire 7500 [Wilshire 7500 is crossed out and changed back to 5000]
and it changed names as companies split and spun off and as the internet IPO [Companies dividing into two]
boom forced a whole load of adds to the index there well then guess what a whole [Stocks flooding into the Wilshire 5000]
bunch of bankruptcies in the dot-com era came along you know along with mergers
and other financial dietary restrictions and they caused the size of the index to
fall to the you know 3,700 names zone where it sits today the Wilshire 5000 [Number of names in the index shrinking]
and yeah we don't know why then I'll just rename it the Wilshire 3,700 ish [Guy changing the sign as 3700ish appears and replaces the 5000]
either well its distinguished from say the S&P 500 in that it covers a much [The S&P 500 is moved away]
broader range of securities from mega cap companies like Apple all the way
down to companies with just a few hundred million bucks in market cap so [Examples of the smaller cap companies are highlighted]
when investors want to think about all stocks or at least the broadest swath of
them they think Wilshire and then a number but they think Wilshire anyway
and well we could give you roughly thirty seven hundred reasons why [Lady Gaga on stage]
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