Tag Archives: size

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 […]

CARES Act: Why Quality Screening Is Now More Important Than Ever

The U.S. stimulus bill (the CARES Act) enacted on March 27, 2020, received significant attention for its support payments to individuals. However, it also has a significant impact for large corporations (see Exhibit 1). This blog will take a closer look at two lending programs and their market impact within their respective segments. CARES Act: Read more […]

S&P Composite 1500®: Providing Efficient, Non-Overlapping Coverage of the U.S. Equity Market

When it comes to measuring the performance of U.S. equity market, some broad market indices have more constituents than others. But having a larger number of constituents does not necessarily lead to significantly wider market capitalization coverage. That’s because broad equity benchmarks are usually market-capitalization weighted, with the majority of the index weight concentrated in Read more […]

Factor Analysis of U.S. Small-Cap Benchmarks

We recently published the 10-year anniversary edition of the paper “A Tale of Two Small-Cap Benchmarks,” which gives insight into why the S&P SmallCap 600® outperformed the Russell 2000, historically.[1] Our latest paper also showed that, in the period from Dec. 31, 2002, to Dec. 31, 2018, profitable companies typically outperformed unprofitable companies in the Read more […]

Does Size Affect the Active versus Passive Score of Small-Cap Mutual Funds?

In my earlier blog, we explored the effect of size on active large-cap equity funds’ performance. We ranked all long-only active large-cap equity funds by their size at the beginning of the observation period and divided them into quartiles, with the first quartile being the largest and the fourth being the smallest. We found that, Read more […]

Index Construction Matters in U.S. Small Cap

Market participants generally expect risk/return profiles to be similar across broad market indices representing the same universe. However, indices’ risk/return characteristics can vary substantially. As of Aug. 31, 2019, the S&P SmallCap 600® returned 10.21% per year since year-end 1993, while the Russell 2000 returned 8.53%. So why is there a substantial risk/return gap between Read more […]

Risk-Reward Analysis of Selecting Active Managers

Although there seems to be more research on economic forecast and market analysis than manager selection, selecting investment managers is just as challenging as direct investing and requires considerable experience and expertise. In this blog, we investigate the return distribution of fixed income and equity funds to highlight the challenge of successfully selecting outperforming active Read more […]

S&P 500 Performance in 2018: How Much Does Size Matter?

2018 certainly proved to be a turbulent period for equities, and the market was especially volatile in the fourth quarter, effectively wiping away all the gains that the S&P 500® had generated in the first three quarters of the year. Overall, the S&P 500 returned -4.38% in 2018. Despite landing in negative territory, the S&P Read more […]

S&P 500 On Pace For Best January Since 1989

In the first seven trading days of 2019, the S&P 500 had its hottest start since 2003.  That happened following the Fed’s message that it was in no hurry to raise interest rates.  The Fed met again yesterday signaling it might end the interest rate increases, which pushed the S&P 500 up 1.55% for the day (Jan. Read more […]

Stocks Rocked The House Post Midterm Elections

After the S&P 500 logged its 9th worst Oct. on record, losing 6.9%, it has bounced back 2.6% month-to-date through Nov. 9, 2018.  Though the monthly returns for the eight Novembers following the historically bad Octobers were only positive twice – in 1978 (President Jimmy Carter midterm year) and 1933 – the fact there was Read more […]