In contrast, the historical average for this dispersion level is 66%. According to S&P Dow Jones Indices, the dispersion is at or near all-time lows.
“With so little variation, it’s just plain difficult to make good picks,” Leeson said in the article. “You can’t tilt a portfolio the way you used to.”
However, stock pickers may notice that biotech stocks show some unusually high dispersion levels. A number of smaller companies have generated breakthrough drugs, which has helped the SPDR S&P Biotech ETF (NYSEArca: XBI), an ETF based on an equally weighted index, outperform the market-cap weighted iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB). Year-to-date, XBI is up 13.2% and IBB is up 12.1%. [Puma Pumps up Biotech ETFs]
For more information on passive ETFs, visit our indexing category.
Max Chen contributed to this article.