Tag Archives: smart beta

Adding the “Factor Flavour” to Indexing

Many people believe that index-based investing and market beta are synonymous. With the growing popularity of index-based investing, exchange-traded funds and index funds based on market benchmarks such as the S&P BSE SENSEX, S&P BSE 100, and S&P BSE 500 are slowly gaining ground. Investors have been familiarizing themselves with market returns linked to these Read more […]

Index-Based Investing: A Simple Solution

Making a suitable investment decision among multiple options has always been a dilemma. Market-linked investment options have generally resulted in apprehensive views from conservative investors who sense that equity markets bear heavy risks. Retail investors who lack an understanding of the markets are at risk, as bull runs tend to promote participation. Index-based investing can Read more […]

Do Signals From Earnings Revisions Matter for Size- or Sector-Neutral Fundamental Factor Strategies?

In our earlier blog, “How Important Are Earnings Revisions Signals for Fundamental Factor Strategies in Asia?”, we discussed that the signals from earnings revisions were important for fundamental factor strategies applied across broad markets. They reduced the risk and enhanced the return of the comparable factor portfolios, across the majority of markets. In our research Read more […]

How Important Are Earnings Revisions Signals for Fundamental Factor Strategies in Asia?

In our previous blog, “The Hunt for Value With High Earnings Expectations in Asia,” we discussed how a simple sequential earnings revision screen historically delivered positive return alpha over the value screen in the majority of markets. The value screen was constructed based on the average of three underlying factors: book value-to-price ratio, earnings-to-price ratio, Read more […]

Return Efficacy of Profitability Metrics in International Small-Cap Equity

Despite both indices representing the U.S. small-cap market, the S&P SmallCap 600® has outperformed the Russell 2000 Index in 16 out of 24 calendar years, with an annualized excess return of 1.81%.[1] Prior research by S&P Dow Jones Indices[2] found that inherent differences in index construction drove the historical return differential. Notably, the profitability inclusion Read more […]

Assessing the Potential of Value Factors in the Indian Market

The value factor looks to bucket stocks that have inexpensive valuation and trade at a discount to their fundamental value, with the hypothesis that inexpensive stocks should outperform overvalued stocks. Observations in empirical research suggested that the value factor performed best when the economy was in recovery and growth was accelerating from trough.[1] We recently Read more […]

Quality Part I: Defining the Quality Factor

Quality is a factor that is frequently disputed and debated. Academics and practitioners often argue whether quality is a factor at all in the traditional risk factor framework. Often times, the debate stems from the fact that there is no one consistent, overarching definition or metric to measure quality. For example, some market participants see Read more […]

Active Management’s Dynamic Exposures to Size and Value Style Factors

In prior blogs,[i] we discussed the return contribution of mega-cap securities in 2017, as well as the impact of style classifications that may give small-cap active managers more autonomy to invest in significantly different risk exposures. In this blog, we look at active factor risks taken by active managers across three market-cap ranges against the 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 […]