Heightened volatility served as one of the major talking points for the first quarter of 2018. While February’s 10% drawdown may seem large given the calm of 2017, taken in aggregate, this year’s volatility is not out of the ordinary. Instead of entering a new market phase where volatility should concern investors, we are re-entering a normal volatility regime.
The divergence of beta and risk
Over the last year, correlations between beta and risk have weakened compared to historical levels. While the two measures of risk are usually highly correlated, beta and risk don’t always mean the same thing.
A case for active investing in low volatility equity
Low volatility equity strategies have become an increasingly popular solution in the investor toolbox. This is largely the result of an increasing awareness of the low volatility anomaly and a growing use of lower volatility seeking smart-beta strategies.
The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic US economy through changes in the aggregate market value of 500 stocks representing all major industries. Investments cannot be made in an index.