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Distinguishing Style From Pure Style Does your style index match your objectives?
BY Aye Soe

EXECUTIVE SUMMARY



• The first-generation S&P Style Indices cover broad market segments, grouped into value and growth categories using style metrics commonly used in the investment community. This makes the indices relevant benchmarks for evaluating the skill of active managers, as well as making them suitable for those seeking a traditional “buy-and-hold” index-linked investment implementation with a tilt toward a particular style.



• In contrast, the S&P Pure Style Indices have a stricter definition of value and growth style factors, leading each to have concentrated exposures. Unlike the standard style indices, there are no overlapping securities between pure growth and pure value, potentially presenting them as better candidates for market participants looking to have precise tools in their investment process.



• Driven by methodological differences, the indices have distinct risk/return characteristics and behave differently in different style cycles. Over the long-term investment horizon, the pure style indices have exhibited greater returns and volatility, lower cross correlations, and wider return spreads than the standard style indices.

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