Tag Archives: index performance

Mar 18, 2021

SPIVA and Style

Last week S&P Dow Jones Indices released its SPIVA® U.S. Year-End 2020 Scorecard. As has been the case for 17 of the past 20 calendar years, the majority of active large-cap managers underperformed the S&P 500®. Performance was better for mid- and small-cap managers, as Exhibit 1 shows. What caused the advantage for smaller-capitalization strategies?…

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Mar 5, 2021

Celebrating 64 Years of the S&P 500

The S&P 500® was launched on March 4, 1957, and so yesterday marked its 64th birthday. To celebrate this milestone, a number of my colleagues and I recently appeared on our Index Investment Strategy team’s weekly call (sign up for the daily dashboard to receive the invite). If you couldn’t make it, here are a…

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Feb 23, 2021

Man Bites Dog: The Year for Active Management?

For at least five years, we’ve noticed that, despite historical performance, active managers regularly proclaim that this year will at last be the time when active management shows its value. I suspect that most advocates of indexing derive at least some guilty pleasure from observing this ritual. (I know I do.) So, we want to…

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Feb 3, 2021

Efficient Markets and Irrational Exuberance

Recent headlines have reflected the extraordinary behavior of GameStop Corp.; the company’s stock rose from $18.84 at year-end 2020 to $325 at the close on Jan. 29, 2021, then declined to $90 in the first two trading days of February. At year-end, GameStop was the 314th largest stock in the S&P SmallCap 600®. By the…

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Jan 27, 2021

The Case for Equal Weight Indexing

2020 witnessed outperformance from some of the largest S&P 500® companies as investors expected these firms to be better placed to navigate the COVID-19 environment. Exhibit 1 shows that this outperformance led to the largest names accounting for an unusually high proportion of the U.S. large-cap equity benchmark, and therefore having a bigger impact on…

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Jan 12, 2021

Style Rotation through the Revenue Exposure Lens

One of the major trends in the last few years has been the outperformance of large, growth-oriented stocks and, at first glance, 2020 represented a continuation of this trend. For example, the S&P 500® Growth (33.5%) outperformed the S&P 500 Value (1.4%) by 32.1% last year, the largest difference in calendar year total returns between…

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Jan 7, 2021

A Reversal, or Two

For many equity investors, the stand-out theme of last year was the reversal in the market’s initial response to, and recovery from, the COVID-19 pandemic: the dramatic price declines in March, the wild swings around the bottom as VIX® marked its highest closing level ever, and the just-as-dramatic recovery to new all-time highs by late…

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Jan 4, 2021

Persistence

Lyndon Baines Johnson became President of the United States at a moment of national trauma, and left office at a time of tremendous political division. Despite a landslide electoral victory in 1964 and notable legislative achievements, his was not a happy presidency. LBJ observed, in fact, that “being President is like being a jackass in…

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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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Dec 1, 2020

The Dangers of Extrapolation

The contrasts between the first 10 months of 2020 and the month of November were vivid. Consider: At the end of October, the year-to-date total return of the S&P 500® was barely positive (2.77%), but was well ahead of the returns of the S&P MidCap 400® (-6.63%) and the S&P SmallCap 600® (-13.06%). In November,…

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