Tag Archives: stock-picker’s market
On Schedule
The poet tells us that in spring, a young man’s fancy lightly turns to thoughts of love. Experience tells us that in January, an active manager’s fancy turns to thoughts of triumph. Earlier this month, we learned that 70% of the institutional investors questioned in a recent poll thought that “markets will favor active management”…
- Categories Equities, S&P 500 & DJIA
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Be Careful What You Wish For
One of the few things more reliable than active managers’ general run of underperformance is their confidence that, despite what happened last year, this year will be different. Two years ago, e.g., active managers were arguably poised to excel because correlations had declined from their financial crisis peaks; a year ago it was active managers’ putative ability to…
- Categories Equities, S&P 500 & DJIA, Strategy
- Other Tags
Sorry, Wrong Number
Last week brought yet another indication that 2014 is proving to be a very difficult environment for active stock selection strategies. With the majority of large cap U.S. equity managers underperforming the S&P 500, “only performances in 2006, 2010 and 2011 have been as bad or worse than the current year’s pace.” Well, in any…
- Categories Equities, S&P 500 & DJIA, Strategy
- Other Tags
Why are active managers lagging?
In late 2013 and early 2014, we heard considerable chatter about the coming “stock picker’s market.” 2014 would favor stock selection strategies, it was said, because intra-market correlation was falling as macro-economic risks receded. This morning’s Wall Street Journal reports that the contrary view — that low levels of stock market dispersion would make 2014 an…
- Categories Equities, S&P 500 & DJIA, Strategy
- Other Tags
Right Conclusion (maybe), Wrong Reason (definitely)
This morning’s Wall Street Journal joined (actually, re-enlisted in) the chorus of those arguing that 2014 would be a time for stock pickers to “shine.” The lynchpin of the Journal‘s case will be familiar to advocates of a “stock-picker’s market.” That argument is that since correlations in the U.S. equity market are declining (perhaps as…
Dispersion and Correlation: Which is “Better?”
We recently introduced the concept of dispersion, which measures the average difference between the return of an index and the return of each of the index’s components. In times of high dispersion, the gap between the best performers and the worst performers is relatively wide; when dispersion is low, the performance gap narrows. Today’s dispersion…