The Gift of a Benevolent Providence

Suppose that I buy a popular exchange traded fund (ETF) tracking the S&P 500® today, leave it in my brokerage account for 20 years, and then sell it.  What return should I expect?  The answer, obviously, is that my return should reflect the movements in the S&P 500 (net of fees) over my 20-year holding Read more […]

The Outperformance of S&P and Dow Jones Islamic Market Indices versus Conventional Indices through Q3 2019

Developed Market Indices Lead, Emerging Markets Lag the Broad Market Global S&P and Dow Jones Shariah-compliant benchmarks outperformed their conventional counterparts YTD in 2019, as Information Technology—which tends to be overweight in Islamic indices—continued to lead the sectors, while Financials—which is underrepresented in Islamic indices—continued to underperform the broader market. The S&P Global BMI Shariah Read more […]

Unicorns: Only in Fairy Tales

“A company for carrying on an undertaking of great advantage, but nobody to know what it is” -Description of company marketed during the South Sea Bubble (1720) Private companies, particularly those hailing from Silicon Valley and combining just the right mix of buzzwords, have captured both headlines and investor attention.  The media report breathlessly on Read more […]

S&P Risk Parity Indices: Positioning for Uncertainty

Uncertainty has been a common theme throughout 2019, and the third quarter proved no different. The quarter was dominated by uncertainties surrounding the U.S.-China trade talks as well as falling global growth forecasts. Demand for high-quality fixed income assets increased, pushing the yield on the 10-Year U.S. Treasury Bond down 34 bps. In spite of Read more […]

Factor Analysis of U.S. Small-Cap Benchmarks

We recently published the 10-year anniversary edition of the paper “A Tale of Two Small-Cap Benchmarks,” which gives insight into why the S&P SmallCap 600® outperformed the Russell 2000, historically.[1] Our latest paper also showed that, in the period from Dec. 31, 2002, to Dec. 31, 2018, profitable companies typically outperformed unprofitable companies in the Read more […]

Does Size Affect the Active versus Passive Score of Small-Cap Mutual Funds?

In my earlier blog, we explored the effect of size on active large-cap equity funds’ performance. We ranked all long-only active large-cap equity funds by their size at the beginning of the observation period and divided them into quartiles, with the first quartile being the largest and the fourth being the smallest. We found that, Read more […]

Commodities September – Short-Term Supply Shocks

Despite the largest one-day spike in oil prices since at least 1989, the broad commodities market only managed to climb modestly in September. The S&P GSCI was up 1.7% for the month and 8.6% YTD. The Dow Jones Commodity Index (DJCI) was up 1.4% in August and up 4.7% YTD. Rallies in the agriculture and Read more […]

Index Construction Matters in U.S. Small Cap

Market participants generally expect risk/return profiles to be similar across broad market indices representing the same universe. However, indices’ risk/return characteristics can vary substantially. As of Aug. 31, 2019, the S&P SmallCap 600® returned 10.21% per year since year-end 1993, while the Russell 2000 returned 8.53%. So why is there a substantial risk/return gap between Read more […]

S&P 500 Quality High Dividend Index In Volatile Markets

The U.S. stock market has experienced a decade-long bull market since the global financial crisis. In fact, from March 9, 2009, to Sept. 6, 2019, the S&P 500® delivered a strong gain of 448% on a total return basis. For market participants who fear an economic slowdown and a stock market pullback, the S&P 500 Read more […]

Happy Birthday to the Communication Services Sector

The Communication Services sector turns one year old on Sept. 24, 2019. A year ago, the Global Industry Classification Standard® (GICS®) replaced the old Telecommunication Services sector with a new Communication Services sector, which combined telecom with some companies that had formerly been classified in the Information Technology and Consumer Discretionary sectors. As a result, Read more […]