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Tag Archives: dispersion

Jan 12, 2022

No Safe Harbor for Stockpickers

We can use volatility and its components dispersion and correlation to analyze stock selection conditions globally. Most active managers run less diversified, more volatile portfolios than their index counterparts. Active managers should prefer above-average dispersion because stock selection skill is worth more when dispersion is high. The role of correlation is more subtle. While counterintuitive,…

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Dec 20, 2021

Active Management: Naughty or Nice?

The history of active investment management is, for the most part, a history of failure and frustration. Most active managers underperform most of the time, and success in one period seems not to predict subsequent success. We have long argued that active underperformance is not coincidental—it happens for identifiable and understandable reasons, and is therefore…

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Sep 13, 2021

Headwinds on the Active Horizon

Active managers’ performance was disappointing in 2020, despite the market’s heightened volatility. As the market continues to march upward in 2021, it’s natural to wonder if current conditions are favorable for stock pickers.  We expect active managers’ difficulties to persist. We can think of volatility in terms of its components: dispersion and correlation. Active managers…

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May 13, 2021

When Active Management Looks Easier

How can style bias impact the perception of active manager outperformance? S&P DJI’s Craig Lazzara and Anu Ganti discuss how a better understanding of style bias can help market participants interpret active manager performance and our SPIVA results. Learn more: https://www.spglobal.com/spdji/en/research/article/style-bias-and-active-performance/

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Mar 30, 2021

Opportunity Does Not Equal Attainment

We’ve previously argued that most managers should prefer above-average correlation, because the incremental volatility a manager accepts to pursue an active strategy will be lower when correlations are high. In addition, active managers should prefer above-average dispersion, because stock selection skill is worth more when dispersion is high. Both correlation and dispersion rose in 2020….

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Dec 9, 2020

The Distribution of Alpha

Investment management is a zero sum game. The source of outperformance for a market’s outperformers is the underperformance of the same market’s underperformers. Properly measured, the weighted average sum of the winners’ gains is exactly equal (before costs) to the weighted average sum of the losers’ losses. This identity, along with the professionalization of the…

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Nov 18, 2020

SPIVA® Latin America Mid-Year 2020 Scorecard: Convergence to Underperformance

We recently published our industry-famous SPIVA report for the Latin America region. SPIVA, which stands for S&P Indices Versus Active, analyzes the performance of actively managed mutual funds against their respective category benchmark. In the case of Latin America, S&P Dow Jones Indices began publishing the scorecard in 2014, covering Brazil, Chile, and Mexico. The…

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Oct 21, 2020

The Unrewarded Risk of Supernormal Fund Returns

The recently released SPIVA® Europe Mid-Year 2020 Scorecard had the unique opportunity to pit the performance of active funds against their passive benchmarks through an exceptionally rare event. The economic fallout from the coronavirus pandemic brought a period of extreme volatility, the likes of which have not been seen in Europe since the global financial…

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Sep 22, 2020

A Practical Look at How Risk is Shifting in Sectors

How can the relationship between sectors and factors help investors identify market regime changes and inform allocations? S&P DJI’s Anu Ganti and Hamish Preston take a closer look at market trends through the lens of S&P Composite 1500® data.     Learn more: https://www.spglobal.com/spdji/en/research/article/the-sp-composite-1500-an-efficient-measure-of-the-us-equity-market/

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Sep 21, 2020

Sectors and Electors

Markets expect elevated volatility surrounding the U.S. Presidential election, now just six weeks away. The VIX futures curve currently peaks in November, but as long ago as April a close observer could detect expectations of electoral volatility. Increased volatility may create an unusual opportunity for sector allocators. To understand why, we need to remember that…

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