Tag Archives: sectors

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 […]

A First Look Inside The Communication Services Select Sector Index

In accordance with the announced upcoming communication services sector change, the new Communication Services Select Sector Index is now live.  The select sectors are based on the Global Industry Classification Standard (GICS®) but have different construction rules than the sectors of the S&P 500.  In the Select Sectors, each index is made up of all Read more […]

Here’s How A Rising Dollar Impacts Stocks

The U.S. dollar hit a 4 month high last week from concern over potentially faster interest rate hikes to control inflation as oil exceeded $70 per barrel and the lowest unemployment since 2000 was reported.  If the U.S. dollar continues to strengthen, it may be useful to know how U.S. equities moved historically in times when the Read more […]

Energy Powers Small Cap And Value In April

In April, the S&P 500 (TR) gained 0.4%, ending its first consecutive monthly loss in almost two years, but the index is still down 0.4% year-to-date (ending April 30, 2018.)  Mid caps are also down for the year, -1.0%, after the S&P 400 (TR) lost 0.3% in April.  However, Small caps pushed into positive territory, up now 1.6% Read more […]

Interest Rate Risk of Low Volatility Indices – Part II

In a previous blog, we performed preliminary exploration of rising interest rate exposure of the S&P 500® Low Volatility Index. In this blog, we continue the analysis to see if there is a relationship between the magnitude of interest rate change and magnitude of active return of the low volatility index relative to the S&P Read more […]

Interest Rate Risk of Low Volatility Indices

A topic commonly brought up when interest rates rise is the impact that rates have on the performance of low volatility indices. Several studies[1][2] have shown that low volatility portfolios have exposure to rising interest rate risk. One of the main drivers of this exposure stems from the bond-like characteristics of sectors usually favored by Read more […]

Water Risk: Looking Back and Looking Ahead

Water scarcity risk has been in the spotlight recently with Cape Town’s efforts to avert “Day Zero” and the risk of taps running dry. Although this risk appears to be receding through radical conservation measures, including wholesale elimination of abstraction rights in some cases, it underlines the common global challenge of increasing fresh water scarcity. Read more […]

Most S&P and Dow Jones Islamic Indices Outperformed Conventional Benchmarks in Q1 Driven by Strength in the Technology Sector

Most S&P and Dow Jones Shariah-compliant benchmarks outperformed their conventional counterparts in Q1 2018, as the information technology sector—which tends to be overweight in Islamic Indices—led the market by a wide margin, and financials—which is underrepresented in Islamic indices—matched the returns of the broad market. The Dow Jones Islamic Market World Index and S&P Global Read more […]

Low Volatility and Market Regime Shifts: Lessons From the First Quarter

Since antiquity, people have measured time in months. Unsurprisingly, investors tend to evaluate performance in monthly increments. This can be troublesome, as we will see in the case of low volatility, particularly during market regime changes. Low volatility strategies are designed to provide investors with protection in falling markets and participation in rising markets. Disappointments Read more […]

Carbon-Efficient Portfolio Construction Part 2: Sector-Relative Improves Efficiency

In a prior blog, we demonstrated that unconstrained carbon-efficient portfolios have significant unintended (and unfavorable) sector and risk factor tilts that can drag down performance. In this follow-up blog, we explore potential ways sector-relative, carbon-efficient portfolios can address the drawbacks of sector-unconstrained, carbon-efficient portfolios. To form sector-relative, carbon-efficient quintile portfolios, we ranked and grouped securities Read more […]