Category Archives: Strategy

Sluggish GDP Growth

First quarter U.S. GDP will be reported on Wednesday morning April 29th; the consensus is for only one percent real growth.  The last few years have been marked by poor GDP growth. The chart compares actual GDP to potential GDP and shows that six years after the Great Recession GDP remains well below its potential. Read more […]

Greece

Forecasts of an imminent Greek default and possibly Grexit, (Greece exiting the euro) abound.  Following the first rule of successful forecasting, no one is willing to put the date and the event in the same sentence. Moreover, while both possibilities have been widely discussed, there is little agreement on what might happen.   If Greece defaults Read more […]

Active Share: Not Necessary, and Definitely Not Sufficient

The concept of active share was introduced several years ago as a measure of the degree to which a portfolio of stocks differs from its benchmark.  One of the intriguing results of the initial research on active share was that high active share managers seemed more likely to outperform than low active share managers.  This led, predictably Read more […]

A Tale of Two Benchmarks: Benchmark Selection

This is the fourth post in a series of blog posts relating to the in-depth analysis of performance differential between the S&P SmallCap 600® and the Russell 2000. The previous posts demonstrate that the different historical risk/return profiles of the two U.S. small-cap benchmarks can be partially explained by the July reconstitution effect and the additional Read more […]

Sector Dispersion and Active Management

Market volatility is a function of both dispersion and correlation, as shown in this schematic: Dispersion measures the degree to which the components of an index perform similarly.  If the components are tightly bunched, dispersion will be low and, other things equal, the index’s volatility will be low.  Correlation is a measure of timing; it measures Read more […]

Introducing the S&P Dow Jones Indices Versus Active (SPIVA®) Latin America Scorecard

S&P Dow Jones Indices is proud to expand the SPIVA Scorecard report to the Latin America region.  The SPIVA methodology is designed to provide an accurate and objective apples-to-apples comparison of active funds’ performance versus their appropriate style benchmark indices.  The SPIVA Latin America Scorecard covers the Brazilian, Chilean, and Mexican markets.  A summary of Read more […]

Variety is the spice of life….and it’s essential for indices, too.

Recently, I seem to have gotten a bit addicted to online shopping, after experiencing the ease of online transactions and the constant exposure to multiple options. Choice is important, and we are increasingly becoming spoiled by abundant choices in our everyday lives, be it with consumer goods or investments.  Online transactions are gaining popularity, not Read more […]

Low Volatility and High Beta: When Opposite Paths Meet

By design, the S&P 500® Low Volatility Index sometimes takes large positions in sectors.  Particularly in times of turmoil, the rankings-based methodology of the S&P 500 Low Volatility Index offered refuge by steering clear of sectors such as financials in 2008 and the technology sector during the 2000-2002 deflation of the bubble. On the flip side, Read more […]

Why Risk Control Works

Recently, institutional investors with long-term investment horizons have responded with aversion to market volatility by considering a number of risk control strategies.  Risk control strategies use dynamic asset allocation (between an index and cash) to target a stable level of volatility in all market environments.  For institutional investors with long-standing liabilities, ranging from defined benefit Read more […]

Dreams to Sell

If there were dreams to sell, a poet asked, what would you buy?  Much more prosaically, if you could design your dream investment process, what would it look like? A simple way to think about the question is to separate success into two dimensions: frequency and magnitude.  Frequency means how often we “win” (i.e., how Read more […]