All Indices/benchmarks articles
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White papersUnderstanding the S&P Managed Risk 2.0 Indices
S&P Dow Jones Indices, in collaboration with Milliman, introduced the S&P Managed Risk 2.0 Indices, which seek to provide core equity strategies with an embedded risk management feature. The key features of this strategy are the following.
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White papers
Three Strategies for Boosting Diversification and Reducing Volatility
While most market participants are well-acquianted with broad market indices, they are often less familiar with indices that may outperform during periods of negative equity market performance and increased volatility.
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White papers
S&P DJI’s Dividend Indices: The Importance of Incorporating Quality Screens
Over the last few months, the COVID-19 pandemic has taken its toll on the global economy in a way that no one could have expected. Unsurprisingly, many companies have had to reassess their dividend policy—in many cases resorting to cutting, postponing, or even suspending dividend payments.
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White papers
Impact of Dividend Announcements on S&P DJI Dividend Indices
Dividend-paying companies have been in the spotlight as a direct consequence of the ongoing COVID-19 pandemic and crude oil glut crisis. A combination of strained corporate cash flows and political intervention has seen many companies cancel, cut or postpone payments globally.
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White papers
The VIX Index and Volatility-Based Global Indexes and Trading Instruments
Tools based on volatility indexes are widely used for hedging, diversification, risk management, and alpha generation, but investors should carefully study the pricing, risks, and other key aspects before deciding to use such products.
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White papers
Seeking Volatility Protection Using Indices
With markets fluctuating between “risk-on” and “risk-off” environments, shifts in economic conditions can pose significant challenges for investors. Exhibit 1 shows events throughout the current market cycle causing dramatic spikes in volatility and large drawdowns. With more of these likely in the future, as our long bull market cycle ages, how do investors best position portfolios to respond?
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White papers
Q1 2020 Performance Review for the S&P Risk Parity Indices
It comes as no surprise that the COVID-19 pandemic had a profound effect on global markets in the first quarter of 2020. The S&P 500® suffered steep declines, and U.S. Treasury yields fell (prices rose) as investors favored a flight to quality. In commodities, the S&P GSCI ended March down an extraordinary 29.4%, the largest monthly drop in performance in its almost 29-year history.
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White papers
Risk Parity and the Fallacy of the Single Cause
Were risk parity strategies really the cause of the recent correlated stock and bond market sell-off, or one of its victims?
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White papers
Two Birds, One Stone: How the S&P Paris-Aligned Climate Index Concept Meets the Proposed EU Climate Benchmark Regulation and the Recommendations of the TCFD
As the world continues to pump the gas on a one-way street toward catastrophic climate change, market actors are attempting to slow down the traffic by limiting global temperature rise to within 1.5°C since pre-industrial levels.
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White papers
The Trade-Off between Upside Participation and Downside Protection
Financial market history is rife with prolonged bull market periods and deep corrections. With no proven way to correctly time the market, market participants can stay fully invested and attempt to capture the potential upside, but they also have to endure and recover from the full depths of drawdowns. Hence, some market participants may choose a tradeoff to mitigate the most severe downside by forgoing a portion of the upside.
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White papers
Have Inverse Indices Been Able to Provide the Hedge You Expected?
Since March 9, 2020, we have seen equities and bonds fall together. As bonds fail to provide the diversification benefit in the short term, some investors may choose to use inverse exchange-traded funds as short-term trading tools for an explicit hedge.
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White papers
Wash Your Hands of Market Timing with Risk Control
The market highs of February 2020 already seem like a strange, distant past, in which people socialized, worked in offices, and were blissfully unappreciative of their abundant supply of toilet paper.
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White papers
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 declines, conditions at that time did not look like bear markets had historically looked. Since our analysis uses a 21 trading day lookback, I providentially noted that “in 21 more days we’ll have a completely new set of observations.”
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White papers
The Rising Importance of ESG Data
The demand from investors for environment, social, and governance (ESG) data and ESG products has never been stronger. This has triggered a growing industry of ESG data providers in the market. It is vital for S&P Dow Jones Indices (S&P DJI), when choosing ESG data providers who drive our ESG solutions to work with market-leading global practitioners. These practitioners must be able to demonstrate in-depth company analysis and robust governance structures, ensuring the quality of their data and our products.
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White papers
Seeking Volatility Protection Using Indices
With markets fluctuating between “risk-on” and “risk-off” environments, shifts in economic conditions can pose significant challenges for investors. Exhibit 1 shows events throughout the current market cycle causing dramatic spikes in volatility and large drawdowns. With more of these likely in the future, as our long bull market cycle ages, how do investors best position portfolios to respond?
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White papers
Why the S&P 500® VIX® Short-Term Futures Index Rose More than VIX in March
Markets are down over 20%, COVID-19 is a global pandemic, negative global growth is looming—all of that just in the first 20 days of March! During same time period, VIX rose 65%, while the S&P 500 VIX Short-Term Futures Index jumped 175%. With a long-term beta of 0.7 to spot, a question might be—why did the S&P 500 VIX Short-Term Futures Index jump more than the spot?
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White papers
Riding through Volatility with the S&P Balanced Global Bond and Equity Futures Index
The S&P Balanced Global Bond and Equity Futures Index (the S&P BEF Index) is designed to deliver consistent returns through various market cycles by exploiting the complementarity between equities and bonds during market crisis, and adjusting the allocation to component indices on a daily basis to achieve a stable risk level (what we call a dynamic volatility control mechanism).
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White papers
Through the Turbulence, a New Breed of ESG Indices Delivers
Have the new beta-like ESG indices delivered on their objectives, notwithstanding the market turmoil? The answer is yes, and then some. The S&P 500® ESG Index has provided low tracking error relative to the S&P 500 and similar risk, but also a better return.
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White papers
Putting Defensive Indices to the Test
In January 2019, we highlighted several indices designed to reduce the impact of large equity market drawdowns. Here we analyze the same suite of indices divided across three broad categories: defensive equity, multi-asset, and volatility. This analysis simply reviews performance since the S&P 500®’s high on Feb. 19, 2020, through the close on Friday, March 20, 2020.
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White papers
Seeking Volatility Protection Using Indices
How broad is the range of passive protection against volatility?
