Tag Archives: low volatility

Most Things Are Relative

The S&P 500 Low Volatility Index measures the performance of the 100 least volatile stocks in the S&P 500. In its latest quarterly rebalance (effective at the market close on February 17, 2017), the index scaled back weightings in Utilities, Health Care and Real Estate while adding weight from the Technology, Financials and Consumer Discretionary Read more […]

Approaches to Achieving Low Volatility

Low volatility has been one of the most in vogue strategies during the past decade, with market participants still cognizant of the drawdowns that occurred during the financial crisis.  At S&P DJI, two of the most common strategies are applied to the S&P 500® universe to capture the low volatility anomaly—which is the observation that Read more […]

Visualizing Factor Exposures

Measuring the away-from-benchmark exposures of active portfolios (or “smart beta” indices) is not inherently complicated.  To what degree, for example, is a portfolio cheaper than its benchmark, or more tilted toward high quality stocks?  Practitioners typically approach the question in one of several ways: Calculating weighted average differences – e.g., the yield on my portfolio is Read more […]

Examining Low Volatility’s Performance in Various Market Environments

Rates, volatility and a broad market rally have contributed to the factor’s late-summer slump Late summer has not been fruitful for the low volatility factor. From July 6 to Sept. 9, the S&P 500 Low Volatility Index has fallen by 4.67%, while the S&P 500 Index gained 1.70%.1 This is in sharp contrast to the Read more […]

Consistency: What Rolling Returns Say About Dividend Aristocrats

Historically, three-year rolling returns have revealed consistent outperformance from the S&P 500® Dividend Aristocrats® Index, which is composed of quality companies with at least 25 consecutive years of dividend growth. Why look at rolling returns? Rolling returns offer a more robust way to show performance than traditional one-, three-, five- and ten-year trailing returns. Rolling Read more […]

When Smart Beta Fails

How should an investor in a factor (or “smart beta”) index judge its performance?  In this respect at least, smart beta is like any other strategy: you should evaluate it against the claims that its vendors made before you bought it. This requires some subtlety.  Smart beta methodologies pick stocks based on fundamental or technical Read more […]

Bouncing Off Brexit

After yesterday’s record close for the S&P 500, memories of last month’s Brexit panic seem far away.  (In fact the U.K. referendum to leave the European Union took place only 19 days ago as of this writing.)  In the immediate aftermath of the referendum, global markets fell sharply, while low volatility indices mitigated the impact of the Read more […]

Indicizing Income

This morning’s Wall Street Journal described one aspect of the “Brave New World” occasioned by ultra-low (or negative) interest rates: Tellingly, strategists at Citigroup have created a basket of stocks for what they call “bond refugees”—investors who want yield but without the big swings in prices associated with equities. To do so, they looked for stocks Read more […]

Braced for Brexit

To say that global financial markets were surprised by results of the June 23rd Brexit referendum would be an understatement. Most market observers had anticipated a victory for Remain. When the Leave camp won, global financial markets reeled from the shock. Low volatility strategies are designed to attenuate returns in either direction, and as such, 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 […]