Tag Archives: active management

Prediction for 2018: There Will Be Many Predictions

A calendar that offers a forecast for every day of the coming year is not uncommon in Chinese households.  I don’t often hear references to the calendar on most days. But every now and again I would hear my mom marvel, “Oh that calendar was right on for today!” In investing, there is also particular Read more […]

2017…Among the Sleepiest of Years

If 2016 was unremarkable, 2017 was downright sleepy…at least as far as equity markets were concerned. In 2017, the S&P 500 notched the lowest level of volatility in 27 years. Both dispersion and correlations were among the lowest levels in the same period. This is in spite of a year that was far from lacking Read more […]

Pockets of Active Achievement

The last 16 years have not been kind to active management. But that shouldn’t come as a surprise. Unless the laws of basic arithmetic change, the theoretical argument on the perils of active management is ironclad. SPIVA data offer solid evidence to back up theory. As the chart below shows, most active managers underperform most Read more […]

What Are Large-Cap Active Managers Up To? A Look at Their Active Factor Bets Relative to the S&P 500 (Part II)

In a recent study published in the Financial Analysts Journal, Ang, Madhavan, and Sobczyk (2017)[1] highlighted that using regression-based factor loadings to measure managers’ factor exposures, even when conducted on a rolling basis, can be misleading due to excessively smoothed coefficients, given that active managers adjust their exposures dynamically. The authors argued that holdings-based attribution Read more […]

Getting What You Pay For

Earlier this week, the Wall Street Journal featured a long article arguing that Morningstar’s star ratings for mutual funds were a “mirage.”   Since these ratings exert a powerful influence over fund flows, their usefulness is obviously of keen interest to investors.  To its credit, Morningstar, although arguing that its ratings are a “worthwhile starting point,” Read more […]

Market Agnosticism

This weekend’s Financial Times brought John Authers’ provocative article on the frequency of financial crises.  Along the way, John gives us some excellent advice: “We should all work on the assumption that we do not know what will happen next.” John’s view of crisis prediction applies equally to the quotidian work of investment management.  Since we don’t Read more […]

Confusing Means and Ends

This morning’s Wall Street Journal informs us that the growth of exchange-traded funds has “propelled” this year’s surge in equity prices.  “Booming demand for passive investments is making exchange-traded funds an increasingly crucial driver of share prices….Surging demand for ETFs this year has to an unprecedented extent helped fuel the latest leg higher for the Read more […]

A New Eden, Or Fewer Excuses

In our May dispersion dashboard, we note that “If there is ever such thing as a “stock-pickers’ market”, then the month of May 2017 – at least in some regions – might be the closest approximation we have seen for a decade.” The subject of what, exactly a “stock-pickers’ market” might look like, and how Read more […]

Three Takeaways From the SPIVA U.S. Year-End 2016 Scorecard

S&P Dow Jones has been reporting the SPIVA® U.S. Scorecard for 15 years now.  Over the years, it has helped contribute to the active versus passive debate in a systematic and objective manner.  While some market segments or styles of active management can be cyclical in their ability to outperform, the secular trends in reported Read more […]

The Wrong Diagnosis

This morning’s Wall Street Journal described how “a $1.4 billion ETF gold rush” supposedly has disturbed the pricing of mining stocks around the world.  $1.4 billion turns out to be the incremental cash flow into a single exchange-traded fund designed to track an index of the gold mining industry, including some relatively small-capitalization companies.  These Read more […]