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Strategies & Market Trends : Diamonds
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To: Gopher Baroque who wrote (2)12/8/1998 8:40:00 PM
From: James F. Hopkins   of 41
 
HI Gopher; The problem about tracking the R2000, via an index or option. ( and they do have options on it but they are not traded
a lot hence they are not very liquid )
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But back to the problem, while many of us can see the Small caps
making a run, IF you get into an index of the small caps it winds
up being handicapped..The R2000 has a built in "lag" because
of it's nature, The Stocks in IT are taken out just when
they get running good the winners get promoted to
the Mid cap index hence they graduate out of the Small cap index
For this reason the R2000 is only good as a short term index,
to compare it to the S&P over a long term is not fair to small caps,
as it's always getting a hair cut when it's best running stocks are dropped, while in the S&P the best running stocks get bought even
more.
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To a lesser extent the MID Cap index suffers from this same problem.
Indexes are not allways what they seem to be. <G>
Jim
P.S.
Message 6718673
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