OneTrust Cookie Consent

Navigation

  • Skip to Content
  • Client Log In
  • Investor relations
  • Sustainability Institute
  • Subscribe
  • Contact us
  • Careers
  • Language
  • Go back to Main Menu
  • Client Log In
  • MSCI ONE
  • MSCI Client Support Site
  • Barra PortfolioManager
  • BarraOne
  • MSCI ESG Manager
  • MSCI ESG Direct
  • Global Index Lens
  • MSCI Real Assets Analytics Portal
  • RiskManager 3
  • CreditManager
  • RiskManager 4
  • Index Monitor
  • MSCI Datscha
  • MSCI Real Capital Analytics
  • Go back to Main Menu
  • Language
  • English
  • Chinese
Navigation

Navigation Menu

  • Our Clients
    • Go back to Main Menu
    • Our Clients
    • Asset Managers
      • Featured

        Insights on MSCI One
    • Asset Owners
      • Featured

        Institutional Client Designed Indexes (iCDIs)
    • Banks
      • Featured

        Total Portfolio Footprinting
    • Corporates
      • Featured

        ESG Trends to Watch
    • Hedge Funds
      • Featured

        Factor Models
    • Insurance
      • Featured

        Total Portfolio Footprinting
    • Wealth Managers
      • Featured

        Visualizing Investment Data
  • Our Solutions
    • Go back to Main Menu
    • Our Solutions
    • Analytics
      • Go back to Our Solutions
      • Analytics
      • Analytics Overview
      • Crowding Solutions
      • FactorLab
      • Fixed Income Analytics
      • Managed Solutions
      • Multi-asset Class Factor Models
      • Portfolio Management
      • Quantitative Investment Solutions
      • Regulatory Solutions
      • Risk Insights
    • Climate and Net-Zero
      • Go back to Our Solutions
      • Climate and Net-Zero
      • Climate and Net-Zero Overview
      • Biodiversity
      • Featured

        Implied Temperature Rise
      • Climate Indexes
      • Climate Lab Enterprise
      • Featured

        Net-Zero Tracker
      • Real Estate Climate Solutions
    • ESG Investing
      • Go back to Our Solutions
      • ESG Investing
      • ESG Investing Overview
      • Featured

        Trends 2023
      • ESG Fund Ratings and Climate Search Tool
        • Featured

          ESG and Climate Funds in Focus
      • ESG Indexes
        • Featured

          Role of Capital in the Net-Zero Revolution
      • ESG Ratings
        • Featured

          What is ESG
      • Impact Solutions
        • Featured

          Role of Capital in the Net-Zero Revolution
      • Sustainable Finance Solutions
        • Featured

          Role of Capital in the Net-Zero Revolution
    • Factor Investing
      • Go back to Our Solutions
      • Factor Investing
      • Factor Investing Overview
      • Featured

        MSCI Japan Equity Factor Model
      • Equity Factor Models
      • FaCS
      • Factor Indexes
    • Indexes
      • Go back to Our Solutions
      • Indexes
      • Indexes Overview
      • Client-Designed
      • Climate
      • Direct Indexing
      • ESG
      • Factor
      • Fixed Income
      • Market Cap
      • Real Assets
      • Thematic
        • Featured

          Thematic Exposure Standard
      • Resources
        • Go back to Indexes
        • Resources
        • Resources Overview
        • Communications
        • Education
        • Equity Factsheets
        • Index Licensing
        • Methodology
        • Performance
        • Regulation
        • Tools
    • Real Assets
      • Go back to Our Solutions
      • Real Assets
      • Real Assets Overview
      • Featured

        Real Estate Market Size
      • INCANS
      • Index Intel
      • Portfolio Services
      • Property Intel
      • Real Assets Performance Indexes
      • Real Capital Analytics
  • Research & Insights
    • Go back to Main Menu
    • Research & Insights
    • Featured

      Trends 2023
    • Research & Insights
      • Go back to Research & Insights
      • Research & Insights
      • Research & Insights Overview
      • Climate
      • ESG
      • Equities
      • Factor Investing
      • Fixed Income
      • Multi-Asset Class
      • Real Estate
    • Events
      • Go back to Research & Insights
      • Events
      • Events Overview
      • Featured

        Capital for Climate Action Conference
      • On Demand
      • Webinars
  • Technology
    • Go back to Main Menu
    • Technology
    • Data Explorer
    • Developer Community
    • Technology and Data
  • Who We Are
    • Go back to Main Menu
    • Who We Are
    • About Us
      • Featured

        2022 Annual Report
    • Corporate Responsibility
      • Go back to Who We Are
      • Corporate Responsibility
      • Corporate Responsibility Overview
      • Enabling Sustainable Investing
      • Environmental Sustainability
      • Governance Practices
      • Social Practices
      • Sustainability Reports and Policies
    • Diversity, Equity and Inclusion
    • Media Room
    • Our Leadership
      • Featured

        Henry A. Fernandez
    • Recognition
  • Client Log In
  • Investor relations
  • Sustainability Institute
  • Subscribe
  • Contact us
  • Careers
  • Language
  • Go back to Main Menu
  • Client Log In
  • MSCI ONE
  • MSCI Client Support Site
  • Barra PortfolioManager
  • BarraOne
  • MSCI ESG Manager
  • MSCI ESG Direct
  • Global Index Lens
  • MSCI Real Assets Analytics Portal
  • RiskManager 3
  • CreditManager
  • RiskManager 4
  • Index Monitor
  • MSCI Datscha
  • MSCI Real Capital Analytics
  • Go back to Main Menu
  • Language
  • English
  • Chinese

Main Search

Popular searches:
ACWI Research ESG Factor Investment Insights Gallery Asset Owners
Might interest you:
Is the Market Ripe for Stock Picking?

Extended Viewer

 

Is the Market Ripe for Stock Picking?

 

Abhishek Gupta
July 13, 2022

Through cross-sectional dispersion of stock-specific returns, we see that the opportunity for active managers to outperform the market through stock selection has increased over the past 12 months (as compared to the prior two years). Cross-sectional dispersion of returns measures volatility across equities over a single period. Total cross-sectional dispersion can then be decomposed into different sources of risk, including country/market, industry, style factors and stock-specific risk.

 

The intensity of dispersion

The ratio of dispersion resulting from stock-specific factors as a percentage of the total has increased over the past year relative to the prior two years. Generally, if this dispersion is low, then most stocks behave similarly, leaving limited opportunity for active managers to outperform the market through stock picking. Conversely, when dispersion has been relatively high, opportunities for stock selection have increased potential.

 

Market influence has diminished

Different equity-market segments, including the U.S., world ex U.S. and emerging markets, as well as varied size segments within these markets, are representing increased opportunities for active managers to outperform the broader market. One explanation for this is the broader equity market’s waning influence in driving the performance of individual stocks. In fact, according to MSCI USA Index data, the U.S. market had been the driver of more than 40% of the cross-sectional dispersion when it peaked in early 2021, but that is now down to nearly 20% as of the end of May.

 

Dispersion has increased over the last year

Cross-sectional volatility average. Period ending May 31, 2022. Monthly data from MSCI U.S. Total Market Equity Model for Long-Term Investors, MSCI Global Total Market Equity Model for Long-Term Investors and MSCI Emerging Market Model for each corresponding region.

Broad market less impactful on stocks since early 2021

Based on the performance of the MSCI USA Index. May 31, 2018, to May 31, 2022.



Related Content

The Dispersion of Stock Returns

Cross-sectional volatility (CSV) measures the opportunity in stock selection as defined by the dispersion in stock returns.

Learn More

Stock Crowding Shifts… Again

The U.S. stock market has plunged 15% to start the year, while growth stocks have fallen even farther. Many firms are suffering through historic drawdowns and a resetting of their valuations.

Explore More

Markets in Focus: Half-Time – Keeping it Real and Defensive

Global equities were down 20% in the first half of 2022 – the worst six-month start to a year since 1975. For the second quarter of 2022, the MSCI Enhanced Value and High Dividend Yield Indexes delivered positive active returns across regional markets.

Read the Blog

msci logo
  • Terms of Use
  • Legal
  • Modern Slavery Statement
  • Privacy notice
  • Index regulation
  • Locations
  • Cookies
  • Use of ISO standards
  • Site map
Subscribe Contact us
© 2023 MSCI Inc. All rights reserved

UtmAnalytics