Tag Archives: momentum

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 […]

Do Dividends Really Pay? (Part 2)

Previously I discussed why preference for dividend-paying stocks may not have a strong theoretical footing, but could be grounded in behavioral and practical reasons. Furthermore, due to possible economic signaling generated by dividends, such strategies may be correlated with widely accepted factors like quality and value. This post demonstrates how specific dividend strategy indices may 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 […]

What do inventories tell us about the economy?

Declining inventories and rising industrial production may create a strong backdrop for value and momentum strategies Falling business inventory ratios have often been a positive economic indicator. With business inventory levels on the decline, value and momentum strategies could be poised to outperform. A strategy that combines value and momentum could serve as a useful 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 […]

A More Thoughtful Approach to Broad Commodity Exposure

Over the last decade, beta commodity exposure has offered investors inefficient access to the commodity market, mostly due to front-month roll methodologies and fixed commodity weights. The Dow Jones RAFI Commodity Index is a broad commodity index based on Research Affiliates’ commodity strategy that utilizes price momentum and roll yield to provide (1) dynamic commodity Read more […]

European Factor Highlights

We recently updated our S&P Europe 350 Factor Dashboard, which shows the factor exposures of a number of our European indices (interested parties can sign up here).  Here are some highlights from our year-end report. Little separated the returns to European core factor indices, but all outperformed While the extremely low stock-level dispersion contributed to Read more […]

Evaluating Value and Momentum Strategies in Latin American Markets

Factor investing has continued to gain momentum in recent years, but the strategy has been predominantly adopted in the developed markets, and research on factor-based strategies in emerging markets remains scarce.  Emerging markets (as measured by the S&P Emerging BMI) returned -13.52% in 2015 but recouped most of the losses in 2016 with a return Read more […]

Multiple Paths to Multiple Factor Indexing

Single factor “smart beta” indicized strategies that were once exclusive to the realm of active management.   Multifactor indexing is beginning to garner much interest as the newest chapter of index innovation. It’s a natural conjecture that if single factors are successful, combining more than one factor should prove even more beneficial.   While any combination of 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 […]