O’Leary said the performance of the FTSE Developed ex-US Qual/Vol/Yield Index was a great illustration of the effects of selecting high quality, low volatility stocks that can pay dividends over time.
“Multi-factor indexes like this which include stocks with these specific characteristics are an important and innovative new tool for investors seeking conservative, long-term investable index solutions,” O’Leary said.
Meanwhile, Yvette Murphy, senior product manager, FTSE Russell, said its index research indicates that stocks exhibiting lower volatility, higher quality and higher dividend yields have performed better than their broad benchmark over time.
“We attribute this to a number of factors, but most notably our research indicates that, in periods of market turbulence, indexes comprised of stocks with this combination of traditionally defensive characteristics have declined less than the broad market,” Murphy said. “Through compounding and drawdown mitigation during market pullbacks, indexes reflecting these characteristics have performed better over the longer term.”
As part of its study, FTSE Russell examined three periods of heightened market stress in the last decade; the 2008-2009 Global Financial Crisis, the 2010-2012 Eurozone Debt Crisis and the 2015-2016 Chinese market sell off. In all three examples, the multi-factor index from FTSE Russell exhibited a smaller drawdown and a shorter recovery time.