Tag Archives: index performance

Not that wrong

Stock markets continue to rally globally, ascending a wall of poor economic data and significant negative sentiment.  Concern that current price levels are unjustifiable is widespread: 78% of respondents to the most recent Bank of America Global Fund Manager Survey believe that the market is overpriced, the highest level since the survey began in 1998.  Read more […]

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 […]

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 […]

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 […]

Equity Liquidity at a Reasonable Price

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 […]

Cushioning the Decline

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 Most Dangerous Words

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 […]

Common Confusion

The critics of passive investing are nothing if not creative.  One of their objections to the growth of index funds stems from the putative problem of “common ownership.”  The argument is that index funds’ ownership of many of the competitors in most industries encourages or facilitates collusive behavior.  “[T]he fear is that by owning chunks Read more […]

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 […]