Tag Archives: dispersion
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,…
- Categories Equities, Factors, S&P 500 & DJIA, Strategy
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Using Sector & Industry Indices to Uncover Opportunity
Could higher dispersion in sectors and industries translate to outperformance? S&P DJI’s Anu Ganti explores how index data can be used to inform tactical sector rotation strategies in periods of high volatility. https://www.youtube.com/watch?v=3GHJ3YohLEE Get the latest sector dashboard: https://spdji.com/indexology/sectors/us-sector-dashboard.
- Categories Equities
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- Equities
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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…
- Categories S&P 500 & DJIA, Strategy
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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…
- Categories Equities, S&P 500 & DJIA, Strategy
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Is Volatility an Investor’s Friend or Enemy?
Explore how high volatility and high dispersion can impact passive and active managers’ performance with S&P DJI’s Craig Lazzara. https://www.youtube.com/watch?v=zdU50uYbvs0 Get the latest Dispersion, Volatility, & Correlation dashboard: https://spdji.com/documents/commentary/dashboard-dispersion-2020-03.pdf
- Categories Equities
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- Equities
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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…
- Categories Equities, S&P 500 & DJIA, Strategy
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Glory or Embarrassment?
Active funds generally lagged their passive benchmarks in 2019, but the market environment in 2020 has already shifted radically. Volatility has skyrocketed as the S&P 500® and other indices have fallen. Ironically, it is precisely in a time such as this, when absolute returns are hard to come by, that relative returns might be most…
- Categories Equities
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- Equities
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Volatile Start to 2020 – What’s Next?
Last year’s prognostications about the events and trends to monitor in 2020 have evaporated as COVID-19 has upended people’s lives and caused massive recalibrations in financial markets. In Q1 2020, we said “goodbye to the bull market”; large market movements became the new normal; correlations and dispersion shifted drastically; quantitative easing returned; and access to…
- Categories Equities
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Coronaviral Correlations
Mea culpa: Roughly a month ago I used a dispersion-correlation map to describe how index dynamics can illuminate market movements. In particular, I reported that since high dispersion seems to be a necessary condition for a bear market, and S&P 500 dispersion levels at the end of February were far below those prevailing in past…
- Categories Equities, S&P 500 & DJIA
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Showtime for Active Managers?
The rapid spread of coronavirus and oil price concerns have whipsawed U.S. equities since the S&P 500® reached its all-time high on Feb. 19, 2020. On March 16, 2020, the index plummeted by 12%, its worst decline since October 1987; as of the close of trading on March 18, 2020, losses for the S&P 500…
- Categories Equities, S&P 500 & DJIA, Strategy
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