Category Archives: Factors

A Way of Seeing

A wise man told me years ago that sometimes the things we see are less important than our way of seeing.  As more formerly-active investors begin to use passive vehicles, it’s useful to consider if there’s a distinctly index-centric way of seeing, and what its elements might be.  I think that there are at least Read more […]

How Australian Dividend Investors Could Benefit from the Core-Satellite Approach

The core-satellite approach splits a portfolio into two parts: the main part, called the core, and a much smaller portion, called the satellite. The core generally consists of “boring” but steady long-term performance (often index funds tracking market portfolios), while the satellite can be anything that could complement the core with risk diversification, outperformance potential, Read more […]

Highlighting the S&P/BMV Index Series

The S&P/BMV Index Series combines the local market expertise of the Mexican Stock Exchange (the BMV) with the resources and reach of one of the most prominent independent global index providers, S&P Dow Jones Indices (S&P DJI). This productive collaboration officially began in May 2015 and adheres to international standards. The relationship also provides the Read more […]

Taking the Discretion out of Factor Selection: The S&P Economic Cycle Factor Rotator Index

Amid the turbulent markets of 2019, the S&P Economic Cycle Factor Rotator Index has been holding steady. The index rotates its allocation between four indices benchmarked to factors—momentum, value, quality, and low volatility—seeking to pick the relevant factor for each phase of the business cycle. The index uses a signal that is based off the 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 […]

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 […]

What’s Inside the S&P China A-Share Factor Indices? Sector Allocation versus Stock-Selection Effect

After examining the risk factor exposure of the S&P China A-Share Factor Indices in our previous blog, we further explore the sector bias and associated impact on index performance. Apart from the S&P China A-Share Enhanced Value Index, all the S&P China A-Share Factor Indices tended to underweight the Financials sector,[1] though other unique sector Read more […]

The Calm That Was

Through the end of July, equities had netted a nice gain for 2019 (though the picture looks a lot different so far in August). Unusually, the S&P 500 Low Volatility Index® outperformed in an environment when it has typically lagged its benchmark. (The S&P 500 gained 20.2%, while the low volatility index was up 20.8%, Read more […]

Concentration Concerns

Readers of this morning’s Wall Street Journal learned (on the front page, no less) that many of the largest investors in the U.S. equity market hold similar portfolios.  “The overlap in the top 50 stockholdings between mutual funds and hedge funds…now stands at near-record levels, a study by Bank of America Merrill Lynch found.”  An Read more […]