Tag Archives: u.s. equities

Decomposing Recent Volatility Events Part 1

After a strong January 2018, the U.S. equity market started February with a roller coaster ride. The CBOE Volatility Index® (VIX®), which has been relatively quiet over the past couple years, spiked up and crossed the 50 mark intraday on Feb. 5, 2018. On the same day, the S&P 500® VIX Short Term Futures Inverse Read more […]

Lack of Performance Persistence Continues for Actively Managed U.S. Equity Funds

The results are in for the latest S&P Persistence Scorecard. Based on data as of Sept. 30, 2017, the results again highlight the lack of performance persistence among actively managed equity funds. Produced semiannually, the S&P Persistence Scorecard highlights the degree of difficulty faced by active managers to stay at the top of their peer Read more […]

Investing in a World of Unknown Future Outcomes: The Benefits of Equal Weighting

Consider this thought experiment: You “know” that 499 of the companies in the S&P 500® will return exactly 5% next year. One will return 100%. You have no way to determine which stock will be the big winner, or to know or infer anything about its characteristics. You can invest in either a cap-weighted S&P Read more […]

It’s a New Day

Yesterday, the first markets day of the New Year, the Dow Jones Industrial Average® continued its advance, finishing up 104.79 points for a 0.42% gain. How does that stack up against the post-holiday return to trading in prior years? Meh…it was nothing special. Not to look a gift horse in the mouth, mind you. A Read more […]

What Are Large-Cap Active Managers Up To? A Look at Their Active Factor Bets Relative to the S&P 500 (Part II)

In a recent study published in the Financial Analysts Journal, Ang, Madhavan, and Sobczyk (2017)[1] highlighted that using regression-based factor loadings to measure managers’ factor exposures, even when conducted on a rolling basis, can be misleading due to excessively smoothed coefficients, given that active managers adjust their exposures dynamically. The authors argued that holdings-based attribution Read more […]

Active Managers: Hope for high dispersion, not just low correlations

The Wall Street Journal recently reported that, according to analysis by Credit Suisse, the correlation among S&P 500 sectors had fallen close to its lowest level ever, and that this was good for active equity managers, “who find it easier to make money betting on specific companies or trends when stocks aren’t all moving together.” Read more […]

Turning Point?

Here are six notable developments in the U.S. financial markets in September 2017. Smaller caps outperformed large caps. Value outperformed growth. Energy was the top-performing sector, and the utilities sector was the worst-performer. Developed markets posted gains, while emerging markets lost steam. Commodity indices rebounded, driven by recent strength in energy. U.S. 10-year and 30-year Read more […]

The Much-Maligned Market Portfolio

It seems generally acknowledged that no investment strategy should be expected to offer an optimal trade-off between return and risk in all periods.  Yet I often hear criticism of market-cap weighting, presumably because modern portfolio theory (MPT) postulates a hypothetical market portfolio as efficient in the mean-variance sense.  Financial engineers, product developers, and asset managers Read more […]

Most Major Islamic Indices Lag Conventional Benchmarks in 2016 as Strong Q4 Financials Sector Gains Detract From Performance

Most of S&P Dow Jones Indices’ Shariah-compliant benchmarks lagged their conventional counterparts for the year, as the financials sector—which is largely absent from Islamic indices—outperformed, and health care—which tends to be overweight in Islamic Indices—was the worst-performing sector globally. The S&P Global BMI Shariah and Dow Jones Islamic Market World finished the year up 4.2% Read more […]

The Most Tranquil of Times

In step with the July, global markets calmed further in August. Based on the dispersion-correlation map, which provides a framework through which we can assess market volatility, equities have entered a very tranquil environment. It wasn’t too long ago that correlation spiked in equity markets due to geopolitical events. That heightened correlation was resolved swiftly Read more […]