A new age of dispersion or just the normal madness of equity markets?

Fabian Scheler

October 23, 2020

For investors who hoped that the pandemic induced market crash would result in a broad regional, sector or style rotation, the second half of 2020 has been rather awful so far.

3 Minute Read

Totally disappointing the hopes of contrarians, Covid19 has struck a blow for winning investments and battered already underperforming strategies.

Winning investments kept winning while loosing strategies continued get beaten. Have we entered a new age where the winners takes it all while the rest lives on government subsidies? The huge success of network players such as the big American tech corporations seems to indicate this.

Our paper therefore looks into recent performance differentials and puts them into perspective by looking into historical dispersion.

We find that during recent years, dispersion has not been particularly elevated. Vast and prolonged performance differentials between stocks and indices are more normal than many investors probably assume.

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