Category Archives: Smart Beta

Bonding with Defensive Equity Strategies

“The aim of the wise is not to secure pleasure, but to avoid pain.” – Aristotle Recent volatility in equity markets may be unsettling to some investors. Skittishness about the stock market is understandable, especially in the context of the serenity in 2017. Volatility levels are relatively higher and risk is on the radar of Read more […]

Adding the “Factor Flavour” to Indexing

Many people believe that index-based investing and market beta are synonymous. With the growing popularity of index-based investing, exchange-traded funds and index funds based on market benchmarks such as the S&P BSE SENSEX, S&P BSE 100, and S&P BSE 500 are slowly gaining ground. Investors have been familiarizing themselves with market returns linked to these Read more […]

Playing Defense and Offense With Factor Strategies

The domestic equity market, as measured by the S&P Composite 1500®, ended Q3 2018 with a gain of 10.47%. Over the past 10 years, the S&P Composite 1500 had annualized returns of 12.05%, showing an impressive bullish run since the 2008 Global Financial Crisis. Perhaps reflecting the market environment, growth-oriented investment styles, such as momentum Read more […]

Measuring Earnings Quality – Balance Sheet Accruals Ratio Versus Earnings Variability

The balance sheet accruals ratio (BSA)[1] is widely used in the investment community to measure earnings quality.[2] This is in part due to accruals being perceived as transient and subject to considerable estimations, manipulations, and potential misrepresentations.[3] BSA is one of the three quality metrics used in the S&P Quality Index Series. We define BSA Read more […]

Combining the Quality Factor With Carbon-Efficient Portfolios – A Higher Quality Tilt With a Lower Carbon Footprint

In a previous blog, we highlighted that carbon-efficient firms tended to be high-quality companies. Moreover, integrated quality + carbon-efficiency hypothetical portfolios tended to have higher risk-adjusted returns and were more carbon efficient than the underlying benchmark. In this blog, we look into the risk and return characteristics of those hypothetical portfolios. This exercise helps us Read more […]

Higher Concentrations in the S&P 500 could lead to Equal Weight Outperformance

At last Friday’s close, S&P Dow Jones assigned a number of technology and consumer discretionary names into a new “Communication Services” sector classification.  Relative to the old Telecommunication Services definitions, the sector has grown from 3 to 22 companies (not counting dual share listings) and is less concentrated in absolute terms.  However, Communications Services remains Read more […]

Do Signals From Earnings Revisions Matter for Size- or Sector-Neutral Fundamental Factor Strategies?

In our earlier blog, “How Important Are Earnings Revisions Signals for Fundamental Factor Strategies in Asia?”, we discussed that the signals from earnings revisions were important for fundamental factor strategies applied across broad markets. They reduced the risk and enhanced the return of the comparable factor portfolios, across the majority of markets. In our research Read more […]

How Important Are Earnings Revisions Signals for Fundamental Factor Strategies in Asia?

In our previous blog, “The Hunt for Value With High Earnings Expectations in Asia,” we discussed how a simple sequential earnings revision screen historically delivered positive return alpha over the value screen in the majority of markets. The value screen was constructed based on the average of three underlying factors: book value-to-price ratio, earnings-to-price ratio, Read more […]

Real Estate Gains Prominence in the S&P 500 Low Volatility Index

Year to date, the S&P 500 Low Volatility Index® has underperformed its parent S&P 500, up 5.52% compared to a 7.55% (through Aug. 16, 2018 close) increase for the benchmark. Those who are familiar with low volatility strategies will recognize that this performance is consistent with the historical pattern of returns and in line with Read more […]

Return Efficacy of Profitability Metrics in International Small-Cap Equity

Despite both indices representing the U.S. small-cap market, the S&P SmallCap 600® has outperformed the Russell 2000 Index in 16 out of 24 calendar years, with an annualized excess return of 1.81%.[1] Prior research by S&P Dow Jones Indices[2] found that inherent differences in index construction drove the historical return differential. Notably, the profitability inclusion Read more […]