There is a subtle but important distinction between factors and factor indices. “Factor” denotes an attribute with which long-term excess returns are thought to be associated. Fama and French, for instance, famously found that small size and cheap valuation were factors in this sense. A number of other variables – prominently including momentum, low volatility, Read more […]
I was recently asked whether volatility was particularly challenging for index fund owners or for active investors. The answer is “yes.” For index funds, the challenge arises because rising volatility typically accompanies poor returns. Between 1991 and 2019, e.g., months in which the S&P 500’s volatility was above median averaged modestly negative total returns. In Read more […]
S&P DJI’s Craig Lazzara explains how style drift could be responsible for inflating the perception of active manager skill. Read the Performance Trickery blogs at: www.indexologyblog.com
A wise man told me years ago that there are some things you can’t get if you go after them directly. If you’ve ever watched someone trying to sound interesting, you’ll realize the truth of my friend’s observation. There are plenty of interesting people out there, of course, but they achieve that status by pursuing Read more […]
Explore how high volatility and high dispersion can impact passive and active managers’ performance with S&P DJI’s Craig Lazzara. Get the latest Dispersion, Volatility, & Correlation dashboard: https://spdji.com/documents/commentary/dashboard-dispersion-2020-03.pdf
Success is hard to come by for active managers, as readers of our SPIVA reports know well. Sometimes what appears to be stock selection skill is in fact simply a byproduct of style drift across the capitalization scale. A majority of large-cap active managers outperformed the S&P 500 only 3 times in 19 years of Read more […]
Mea culpa: Roughly a month ago I used a dispersion-correlation map to describe how index dynamics can illuminate market movements. In particular, I reported that since high dispersion seems to be a necessary condition for a bear market, and S&P 500 dispersion levels at the end of February were far below those prevailing in past Read more […]
The fall in equity market values since February’s peak has been sudden and dramatic. During this period, the equity markets have functioned well at their primary task of facilitating price discovery at a time when values were changing rapidly. Equity investors who wanted to trade have been able to trade. (Whether they were wise to Read more […]
With the S&P 500 down -14.7% for calendar 2020, and -18.8% since its peak in late February, investors are rightly concerned to identify strategies that might help to mitigate the ongoing decline. A number of defensive factor indices have performed relatively well in March, but the leader for the year so far is S&P 500 Read more […]
The four most dangerous words in investing are “This time it’s different.” – Sir John Templeton As investors ponder the ultimate extent of the coronavirus epidemic, this week’s equity market declines are of natural concern to every asset owner. The obvious question, after near-record point drops in major indices yesterday and today, is how much Read more […]
