Tag Archives: U.S. Equity Market

Volatility, Short- and Long-term

This morning’s Financial Times highlighted a study of market volatility suggesting that return and volatility are inversely related — that “the correct response to an increase in volatility…is to exit the market.” This is certainly true in the short run, as the table below confirms. In months when the realized volatility of the S&P 500 was above Read more […]

Watch Your Weight: How a Few Stocks Can Tilt the Scales

Not all indexes are created equal. That’s because they weight the individual holdings differently. Market-cap indexes provide the largest weighting to the largest holdings regardless of fundamental characteristics, whereas fundamental indexes break the link between price and weight. With the proliferation of smart beta strategies, investors have more access and choice to select alternative weighting Read more […]

Valuing Low Volatility: Does Timing Matter?

If early January is any indication, 2016 should be another year when low volatility strategies will be in vogue. Popularized in the turmoil following the financial crisis in 2008, low volatility strategies, as the name denotes, serve well in times of equity upheaval. And despite bearing lower risk low volatility strategies have outperformed their benchmarks Read more […]

Not Your Father’s Low Volatility Strategy

Low volatility strategies were a popular and growing category in 2015, and if the first several days of 2016 are any indication, it wouldn’t be surprising to see their popularity continue in the new year. That said, the topic of low volatility investing often comes with much discourse. A frequent argument is that a low Read more […]

The S&P 500’s Flat Year

By now we are all painfully aware that the U.S. equity market was essentially flat in 2015.  The S&P 500’s total return was 1.38%, all of which was a function of dividend income — the index’s price return was -0.73%.  Other large-cap averages were in the same ballpark — the Dow Industrials, e.g., logged a total Read more […]

Perseverance and Low Vol

“He conquers who endures.” ~Persius Weak markets tend to make low volatility indices shine. As a strategy that attenuates the performance of the broader market, the S&P 500 Low Volatility Index had lagged the benchmark S&P 500 by 1.22% from the beginning of 2015 thru July 31. As of last Friday, the tide has shifted Read more […]

Selection or Allocation?

Mr Burge: Do you know Lord Astor has made a statement to the police saying that these allegations of yours are absolutely untrue? Mandy Rice-Davies: He would, wouldn’t he?  At the trial of Stephen Ward, 29 June 1963, in The Guardian 1 July 1963 Like the unfortunate viscount, there’s a certain predictability to the advocates of active Read more […]

Active Share: Not Necessary, and Definitely Not Sufficient

The concept of active share was introduced several years ago as a measure of the degree to which a portfolio of stocks differs from its benchmark.  One of the intriguing results of the initial research on active share was that high active share managers seemed more likely to outperform than low active share managers.  This led, predictably Read more […]

Sector Dispersion and Active Management

Market volatility is a function of both dispersion and correlation, as shown in this schematic: Dispersion measures the degree to which the components of an index perform similarly.  If the components are tightly bunched, dispersion will be low and, other things equal, the index’s volatility will be low.  Correlation is a measure of timing; it measures Read more […]

Infrastructure Preferreds, +4.96% YTD

Over a three-year period, the annualized returns of the U.S. preferred market have been more bond-like than equity-like.  The S&P U.S. Preferred Stock Index had a three-year annualized return of 7.95% as of March 27, 2015 while long U.S. Treasury bonds have returned 8.14% in the same period.  Meanwhile, the three-year annualized return of the Read more […]