1. Poor wordsmithing on my part - as discussed in my past article on RSP, equal weighting is a contrarian strategy that rebalances by buying stocks that have fallen and selling stocks that have risen when compared to the cap weighted SPY 2. Don't have good enough historical constituent data 3. Will publish in future article.
Not sure survivorship bias is a large factor here - the index would be selling companies that cut their dividends - likely into weak market prices - PBI has rallied sharply since December, and market cap is now about 20% north of threshold - I don't have good enough historical constituent data to test this hypothesis - perhaps someone in the community can help with this info - thanks for reading
Rising rates are traditionally correlated with strong economic growth which lifts higher beta stocks disproportionately. I would certainly rather own the equity of these DA's than lend them money at today's interest rates, so I favor them over fixed income alternatives.
1) While 20-25 years is a long time period, and the Low Volatility Anomaly has been present around the world over that time period, it is still a relatively short time span and corresponded with some large drawdowns in equity markets. I do believe that returns are at a minimum not a linear function and increase at a decreasing pace. (Think about historical returns in fixed income ratings cohorts).
2) Me too - I think that steady dividend payers will perform well over the intermediate term as they catch fund flows rotating out of fixed income.
3) Using leverage is not for everyone, but is an extension of my belief on return profiles in point 1. I don't believe that investors should go out and cash out all of their home equity, but they should understand the parallel with BRK. Stock earnings yields less mortgage rates are probably at generational wides. For investors with a comfortable amount of equity in their home, refinanced at today's low rates, buying stocks may be preferrable to early incremental paydown of the mortgage.
4) I am not expecting DA's to dramatically underperform, but there will be a point in the cycle when companies with weak balance sheets and higher operating leverage will outperform. If these stocks get bid up too aggressively, this is a clue that the market valuation is full.
I expect that there are market participants who try and game additions to the S&P 600 akin to those who do the same for the S&P 500, but I have not found a study on the efficacy of this trade, so it doesn't appear to be a mainstream strategy. It would seem to be a much tougher trade to accomplish. As the market capitalizations drop, the number of potential candidates for inclusion widens. Absent a mechanical approach to inclusion like the Russell 2000, it would seem to be harder to game, and since the additions are on an as needed basis it would be difficult to time.
The Dow Jones indices are most similar to the Russell indices - I will look into historical returns - until then, here is a link to a side-by-side comparison of the indices http://bit.ly/WINd35
Jon - I have not looked at these indices before, but will see how long of a history is available. If there is a meaningful track record and reader interest, I will put an article together in the near future.
No Stephen, the earnings and float criteria are inclusion rules. The rules are not mechanical. There is likely a float limitation after inclusion, but it does not appear to be a bright line test.
Dividend Aristocrat Investing 2013 [View article]
2. Don't have good enough historical constituent data
3. Will publish in future article.
Dividend Aristocrat Investing 2013 [View article]
Dividend Aristocrat Investing 2013 [View article]
Dividend Aristocrat Investing 2013 [View article]
Dividend Aristocrat Investing 2013 [View article]
Dividend Aristocrat Investing 2013 [View article]
1) While 20-25 years is a long time period, and the Low Volatility Anomaly has been present around the world over that time period, it is still a relatively short time span and corresponded with some large drawdowns in equity markets. I do believe that returns are at a minimum not a linear function and increase at a decreasing pace. (Think about historical returns in fixed income ratings cohorts).
2) Me too - I think that steady dividend payers will perform well over the intermediate term as they catch fund flows rotating out of fixed income.
3) Using leverage is not for everyone, but is an extension of my belief on return profiles in point 1. I don't believe that investors should go out and cash out all of their home equity, but they should understand the parallel with BRK. Stock earnings yields less mortgage rates are probably at generational wides. For investors with a comfortable amount of equity in their home, refinanced at today's low rates, buying stocks may be preferrable to early incremental paydown of the mortgage.
4) I am not expecting DA's to dramatically underperform, but there will be a point in the cycle when companies with weak balance sheets and higher operating leverage will outperform. If these stocks get bid up too aggressively, this is a clue that the market valuation is full.
The Small Cap Stock Index For You [View article]
The Small Cap Stock Index For You [View article]
The Small Cap Stock Index For You [View article]
Equal-Weighted S&P 500 And The Apple Impact [View article]
Very interesting point on RSP and IWM!
The Small Cap Stock Index For You [View article]
http://bit.ly/WINd35
The Small Cap Stock Index For You [View article]
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The Small Cap Stock Index For You [View article]
The Small Cap Stock Index For You [View article]