Monday, July 30, 2012

Is this a Stock Picker's Market?

Ever since 2007, when the market started to do whacky things, many investment managers have been looking for a "stock picker's market" in which correlations recede and alpha can be generated by picking a better group of stocks than the next guy rather than being at the whims of beta.

In order to gauge whether 2012 is finally a stock picker's market, below are some histograms of the performance of S&P 500 components grouped by buckets of return.  Perhaps one might expect that a stock picker's market would show a relatively even distribution among the buckets rather than a concentration in any single bucket.  To the extent that hypothesis is correct, 2011 looks slightly more like a stock picker's market than 2012.

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