Tag Archives: dispersion

Did Latin American Active Managers Outperform in This Tumultuous Time?

Low volatility and dispersion make it harder for active managers to add value. In other words, high volatility and high dispersion environments are expected to favor active managers to demonstrate their skill. In this aspect, March 2020 offered an opportunity to active managers[1] across the world, including in Latin American equity markets. High dispersion and Read more […]

Battle of Factors: Low Volatility versus High Beta

2020 has surprised us all with a number of firsts. Not only did we witness wild swings in the market from one quarter to the next, we also saw an unusual performance of commonly followed factors. While this blog will not attempt to predict factor performance, it will address recent factor behavior and put this Read more […]

A Conundrum in a Different Key

Volatility, dispersion, and correlation are elements of what we’ve elsewhere characterized as The Active Manager’s Conundrum. Active managers should prefer: Low volatility, which is typically associated with higher returns High dispersion, which means a larger payoff for correct stock selections High correlation, which reduces the opportunity cost of a concentrated portfolio The conundrum arises because Read more […]

Making Sense of the Active Manager’s Conundrum

Why are the market environments most conducive to generating positive absolute returns the least conducive to producing positive relative returns? Explore the active manager’s conundrum with S&P DJI’s Craig Lazzara and Anu Ganti. Read more here: https://spdji.com/research/article/the-active-manager-s-conundrum

Factors and Factor Indices

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 […]

Using Sector & Industry Indices to Uncover Opportunity

Could higher dispersion in sectors and industries translate to outperformance? S&P DJI’s Anu Ganti explores how index data can be used to inform tactical sector rotation strategies in periods of high volatility. Get the latest sector dashboard: https://spdji.com/indexology/sectors/us-sector-dashboard.

Two Sides of Volatility

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 […]

The Defensive Advantage

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 […]

Is Volatility an Investor’s Friend or Enemy?

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    

Performance Trickery, part 3

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 […]