Tag Archives: Index Investment Strategy

Momentum’s Minsky Moment?

U.S. equity funds following momentum (or relative strength) strategies have generally performed well recently, and their performance has been rewarded with inflows.  This is important because momentum, uniquely among investment styles, is self-reinforcing – until it isn’t. Typically, as factors become more popular, their excess returns are likely to diminish.  For example: the more value Read more […]

The Skill of Champions in Sports & Active Management

The last few days have been a feast of entertainment for the sporting enthusiast; the Champions League Final, the Monaco Grand Prix, and the NBA Conference Finals were all on the menu.  While the sports represented are distinct, these events have something notable in common: the persistence of their participants.  The same two teams reached Read more […]

Sector Volatility Conveys Most (But Not All) of the Story in the Latest S&P 500 Low Volatility Index Rebalance

In January 2018, realized volatility (rolling 252-day) for the S&P 500 reached a 27-year low. Since then, volatility has been steadily creeping up and as of April 30, 2018, it sat at 12.1%—almost double the levels in January. Despite having increased significantly, volatility is still well below the historical average of 16%. Rolling 252-Day Volatility Read more […]

How Equal Weight Avoided Japan’s “Lost Decades”

S&P Dow Jones Indices recently launched the S&P Japan 500 Equal Weight Index, an equal-weight version of the S&P Japan 500.  Over the 15-year period ending in February 2018, encompassing the latter part of Japan’s so-called “lost decades” of stagnant equity returns, the equal-weight index would have outperformed the cap-weighted Japanese equity benchmark by a stonking Read more […]

Technology may be de-FANGed, but could the CHANDs leave you hanging?

It has not been a great start to the week for the technology sector, with large-cap tech stocks dragging down equity indices across the globe. With the current media focus on the industry behemoths, suitably arranged into fun acronyms (“FANGs” and so on), investors in the U.S. tech sector might be concerned about the risks Read more […]

A new volatility regime? VIX® don’t think so!

Global equity markets experienced a challenging February.  A U.S.-led selloff triggered a spike in volatility; the Cboe Volatility Index (VIX) recorded its largest ever daily increase on February 5 to reach its highest level since August 2015. But is higher volatility here to stay? Towards the end of last year, we published a paper – Read more […]

The Rise of Sectors: Active and Passive Applications

Investment strategies that switch between sectors or industries – and the related activity of using sectoral performances to discern broader macroeconomic trends – have long been an part of professional investing.  However, it is surprisingly difficult to find even basic research explaining how sectors are classified, why they are important and how they might be Read more […]

Can High Concentrations Lead to Equal-Weight Outperformance?

Assigning equal weights to each constituent, such as in the S&P 500 Equal Weight Index, historically would have offered material outperformance over capitalization-weighted benchmarks across a range of markets.  Earlier this year, we published a paper examining how this occurred. There are several perspectives one can take, ranging from factor or sector exposures all the Read more […]

The Difference a Few Days Make

For investors, things looked very different between the end of January and the first part of February. Following a few days of market turmoil in February, volatility jumped to levels where it is once again at the forefront of investors’ consciousness. Volatility based on a 252-day lookback generally declined for S&P 500 sectors (Telecom excluded) Read more […]

Explaining Equal-Weight Indices

Our recent paper explores the characteristics and applications of equal-weight indices from various standpoints. Since a number of equal-weight indices have outperformed their corresponding cap-weighted parents over the past 15 years, one of the most interesting perspectives asks if factors can help to explain the excess returns of equal weight.  Which factors are most relevant? Read more […]