Category Archives: Factors

Why the Volatility Spike is the Low Volatility Strategy’s Best Friend

The first half of 2019 saw one of the biggest rallies in the domestic market; the S&P 500® rose 18.54% on a total return basis despite concerns of slow economic growth, a trade war, and a possible rate hike. During the same period, the S&P 500 Low Volatility Index surprised the market and rose even Read more […]

Understanding the ESG Consequences of Factor-Based Investing: Part 2

    In our previous blog, we looked at the S&P Factor Indices’ ESG exposures, showing that factor exposures can have an influence on ESG scores. In this blog, we’ll discuss these scores at the sector level and see how implementing an ESG or carbon reduction strategy on poorer ESG-performing factor indices can help investors Read more […]

Carlos Urzúa Resignation and Low Volatility’s Response

Mexico’s Finance Minister, Carlos Urzúa, abruptly resigned on July 9, 2019 over policy disagreements with the current government.[1] Market participants reacted negatively, generating volatility in the Mexican peso’s exchange rate, which fell 2.3% right after the announcement,[2] and the country’s equity market, and bringing a trial by fire for the S&P/BMV IPC Risk Weighted Index Read more […]

The Importance of Being Large-Cap

The performance of U.S. equity factors during Q2 was lackluster, with most underperforming the S&P 500, as seen in Exhibit 1.  While Minimum Volatility and Low Volatility were notable exceptions, Value, Quality, High Beta, and Momentum all lagged the benchmark – in large part because of their tilt toward smaller companies.  Since most factor indices Read more […]

Understanding the ESG Consequences of Factor-Based Investing: Part 1

    “Sustainable investing must go mainstream. Fortunately, the momentum is growing.” – Mark Carney Mark Carney’s statement underpins the sentiment of the investment community, where environmental, social, and governance (ESG) considerations have entered the forefront of investors’ priorities. Whether factor indices have ESG principles integrated or not, understanding a factor’s influence on ESG characteristics, Read more […]

Four Decades of the Low Volatility Factor

Many financial theories are based on the idea that riskier investments should offer higher returns.  However, there is a bank of evidence – accumulated since the 1970s – showing that less volatile stocks posted higher risk-adjusted returns across a number of time horizons, regions, and market segments, historically. S&P Dow Jones Indices produces a range Read more […]

How Does Factor-Based Investing Work in the China A Market?

Factor-based investing has gained popularity in the global investment community. While the long-term risk premia of factors have been evidenced in developed equity markets, some believe the inefficiencies in emerging markets could create better opportunities for factor-based investing. In our recently published paper, “How Smart Beta Strategies Work in the Chinese Market,” we examined the Read more […]

A Look at Index History Part 2

This is more an eyewitness account than an analytical review of the growth of indexing since I joined S&P in 1982. The growth in indexing in the 20 years from S&P 500 futures in 1982 to the bottom of the tech bear market in 2002 was just a warm up. Two trends encouraging index growth Read more […]

Little Churn in the Latest Low Volatility Rebalance

Market gains in the first four months in 2019 more than made up for what it lost in the turbulent last quarter of 2018 as the S&P 500 jumped 18%. Predictably enough, the S&P 500 Low Volatility Index® trailed the broader benchmark (up a “mere” 16% in the first four months), although Low Vol has Read more […]

Low Volatility and Minimum Volatility Are Not the Same

Global equities have been turbulent recently as a combination of stalled trade negotiations and announcements of tit-for-tat tariffs increased the prospect of a trade war between the U.S. and China.  After its historic start to the year, the S&P 500 is down 3.7% so far in May, while many other markets have also faltered month-to-date.  Read more […]