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Practical Applications

Practical Applications

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Practical Applications of The Impact of Market Conditions on Active Equity Management

Harsh Parikh, Karen McQuiston and Sujian Zhi
Practical Applications 7 (1) DOI: https://doi.org/10.3905/pa.7.1.337
Harsh Parikh
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Karen McQuiston
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Sujian Zhi
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Practical Applications Summary

In The Impact of Market Conditions on Active Equity Management, from the Winter 2018 edition of The Journal of Portfolio Management, authors Harsh Parikh of PGIM, Karen McQuiston of BlackRock, and Sujian Zhi of Huatai Securities analyze the performance of active equity management approaches relative to a trio of measures of “market conditions”: (1) dispersion of returns across equities during a given period, (2) volatility of overall market returns over time, and (3) the overall level of market returns. The authors’ goal is to help investors meet their objectives through portfolio constructions suited to variations in those conditions. The authors explore how, between 1996 and 2016, the excess returns delivered by active equity managers—both quantitative and fundamental—fared in response to different market environments.

The authors collected and arranged into quartiles 21 years of market-condition data from the large-cap U.S. equity space, modeling the relative performance of a potpourri of portfolio combinations—a mix of core, growth, and value styles and of high-, moderate-, and low-intensity management approaches—against the three market conditions.

The authors uncovered correlations between certain active management approaches and predominating market conditions. They note that the reputation of active equity management, currently in question, might be boosted if markets begin to falter and greater dispersion is seen across individual stock returns, which could rekindle the effectiveness of judicious stock picking.

TOPICS: Security analysis and valuation, manager selection

  • The content is made available for your general information and use and is not intended for trading or other specific investment advice purposes or to address your particular requirements. We do not represent or endorse the accuracy or reliability of any advice, opinion, statement, or other information provided any user of this publication. Reliance upon any opinion, advice, statement, or other information shall also be at your own risk. Independent advice should be obtained before making any such decision. Any arrangements made between you and any third party named in this publication are at your sole risk.
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Practical Applications: 7 (1)
Practical Applications
Vol. 7, Issue 1
31 Jul 2019
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Practical Applications of The Impact of Market Conditions on Active Equity Management
Harsh Parikh, Karen McQuiston, Sujian Zhi
Practical Applications Jul 2019, 7 (1) DOI: 10.3905/pa.7.1.337

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Practical Applications of The Impact of Market Conditions on Active Equity Management
Harsh Parikh, Karen McQuiston, Sujian Zhi
Practical Applications Jul 2019, 7 (1) DOI: 10.3905/pa.7.1.337
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