Category Archives: Smart Beta

The Role of Quality in Long-Term Value Creation

  This is the third in a series of blog posts relating to the launch of the S&P Long-Term Value Creation (LTVC) Global Index. In the last blog, we discussed how long-term investing requires looking at metrics that go beyond the standard GAAP financial accounting measures and why the Economic Dimension (ED) score from RobecoSAM Read more […]

Low Vol: A little goes a long way

We’ve written at length of the many historical benefits of the low volatility anomaly. The S&P 500 Low Volatility Index selects the 100 least- volatile members of the S&P 500 index; lacking any sector constraints, the index seeks to provide pure exposure to the low volatility factor. In doing this, it has experienced a large tracking Read more […]

Watch Your Weight: How a Few Stocks Can Tilt the Scales

Not all indexes are created equal. That’s because they weight the individual holdings differently. Market-cap indexes provide the largest weighting to the largest holdings regardless of fundamental characteristics, whereas fundamental indexes break the link between price and weight. With the proliferation of smart beta strategies, investors have more access and choice to select alternative weighting Read more […]

Making the Patient Sicker

Years ago, I saw a cartoon picturing two Victorian-era doctors discussing a patient.  “What did you prescribe for Jones’ rheumatism?” asked the first; the second answered “A cold bath and a brisk walk every morning.”  “Good God, man, that will give him pneumonia!” said the first.  “I know,” replied the second doctor, “I made my reputation curing that.” Somehow Read more […]

Factor Based Indices in India

The recent turmoil in the Chinese market has taken the global market on a turbulent ride since the beginning of 2016. India was no exception. During the first two weeks of 2016, the S&P BSE SENSEX lost almost 6.37%, making some investors jittery. Foreign investors took out almost INR 34.84 billion from the Indian stock Read more […]

Pure Style Eliminates the Muddle in the Middle

Financial advisors who implement style investing seek to outperform the blended benchmark whenever they believe that market conditions will favor either a growth or a value approach.  Their view could be influenced by research, fundamental factors, or technicals.  To implement such a view does not require 100% conviction in either growth or value.  In fact, Read more […]

Details of the Two-Factor Model

After identifying value and low volatility as factors that can effectively explain the return and volatility of an investment-grade corporate bond portfolio, we proposed a two-factor model to capture the security selection process of active corporate bond managers. The underlying universe for our study is the S&P U.S Issued Investment Grade Corporate Bond Index from Read more […]

Dividend and Low Volatility-Investments

It’s been a tough start to the new year for the S&P 500®, with a 6.4% decline (as of Feb. 3, 2016).  However, the year-to-date performance of certain factor-focused smart-beta indices tied to subsets of the S&P 500 is relatively bright. The S&P 500 is a well-diversified US equity index, seeking to provide exposure to Read more […]

Volatility Rides Again

Global equity markets stumbled out of the gate in 2016, and still haven’t found their stride. Markets are experiencing an intense case of risk off sentiment, as investors flee from riskier assets in pursuit of safe havens. The yield of 10 year US Treasury Notes is down to less than 1.8%, while oft-maligned gold is Read more […]

Credit Spread and Low Volatility Factors

Factor Definition The fixed income investment community has long used volatility in analyzing bond valuations and identifying investment opportunities.  We have defined volatility as the standard deviation of bond yield changes for the trailing six-month period.  All else being equal, the more volatile the bond yield is, the higher the yield needs to be in Read more […]