Do equities that suffer the greatest losses in the initial stages of a major market downturn subsequently outperform during the recovery? Here we examine the 10 largest US equity downturns of the past 38 years along with the current COVID-19 market crisis focusing on the performance of the worst performing quintile during the initial downturn, in the expectation that these names might experience mean-reversion and gain more during the market recovery than they lost at the outset.
This paper explores the similarities between the current COVID-19 crisis and the early stages of the global financial crisis (GFC) in an effort to identify sensible investment strategies for the next few weeks. Since some stocks experienced strong reversals during the GFC, we suggest that may occur now. In addition, factor strategies that outperformed during the GFC may also do well now.
Environmental, social and governance (ESG) data availability, marketing presence and regulation continue to increase in the investment community. Recent articles have reported several remarkable instances of score divergence between data vendors. However, those articles did not attempt to determine whether the disparities represented isolated outliers or were a common occurrence in ESG data.
This paper examines the Index Effect and reports that it has weakened significantly since 2013. The Index Effect is the phenomenon where stocks added to an index experience positive excess returns in the days immediately before they are officially added to the index, while stocks that are removed from the index experience negative excess returns in the days immediately before they are officially removed.
We evaluate the investment performance of ESG, paying particular attention to recent performance and highlighting the difference between ESG scores that overlap with traditional risk model factors and those that don’t. Our analysis indicates that, in general, increasing exposure to ESG rarely underperforms the market, and often outperforms the market, especially during the last few years.