So far, 2020 has brought us a global pandemic, a coordinated global economic shutdown, and, in the U.S., a notably contentious election. So it’s no surprise that volatility has been, and remains, elevated. Despite all this, equities have fared reasonably (some would say surprisingly) well, with the S&P 500® climbing 13% through Nov. 19 since…
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The market has recovered most of the losses from March’s uproar, with the S&P/TSX Composite Index down 4.8% in 2020 through Sept. 17. Volatility, though off its March peak, continues to be high but has been evenly distributed across all sectors of the market. Since all sectors experienced similar increases in volatility, it’s not surprising…
In the factor world of investing, Low Volatility and Quality have been commonly referred to as defensive factors. The following is an examination of the performance of the S&P 500 Quality Index and the S&P 500 Low Volatility Index compared to the S&P 500 during the last 3 equity bear markets. The graphs and data…
The equity risk premia from factors (such as quality, momentum, and low volatility) have been widely accepted and adopted by investment practitioners across the globe and South Africa alike. The belief by many is that exposure to these risk factors, in addition to the market, could reward investors over the long term. While the long-term…
In recent days the S&P 500 reached multiple new highs, despite the still-uncertain nature of the economy’s recovery from the COVID-19 pandemic. Year to date through Aug. 20, 2020, the S&P 500 is up 6% while the S&P 500 Low Volatility Index is down 6%. Market volatility remains high, as evidenced by the charts in…
In our paper, How Smart Beta Strategies Work in the Australian Market, our studies indicated that most factor indices in Australia exhibited distinct return characteristics during up and down markets. Indeed, different factor indices also displayed unique style and industry factor exposures, resulting in factor index performance differentials over the long term. In this blog,…
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…
In March, COVID-19 inspired volatility roiled markets across the globe. Similarly, the volatility of the S&P/TSX Composite also jumped. The increase, however, was not balanced across all sectors. We see this manifested in the most recent rebalance for the S&P/TSX Composite Low Volatility Index. Effective after the close of trading April 24, 2020, Exhibit 1…
The world looks much different than it did three months ago. Since then equities hit their all-time peak, entered a bear market, exited a bear market, and currently sit 15% off peak with sustained higher volatility levels. The latest rebalance for the S&P 500 Low Volatility Index®, effective after the close of trading today, rotated…
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,…
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