Surz indexes break out value, core, and growth stock groupings within each market cap by establishing an aggressiveness measure that combines dividend yield, price-to-earnings ratio, and price/book ratio. The top 40% (by count) of stocks in aggressiveness are designated as growth, while the bottom 40% are called value, with the 20% in the middle falling into core. The result is a family of indexes that are mutually exclusive and exhaustive, making them perfect for style analyses, including both returns-based and holdings-based style analysis, as discussed in the next section. But they also reveal the reasons that S&P and Russell occasionally disagree – it’s because they’re missing Core. The following exhibit documents some recent instances of the importance of including a Core index.
Core usually performs between value and growth, but about a third of the time it does not, including the periods in the exhibit. During these unusual times the Surz indexes, as an alternative to Russell and S&P, provide conspicuously valuable insights. Surz indexes have been around for more than 20 years.
More importantly, there are times when Russell and S&P agree, but the reality is significantly different. Such was the case during the financial crisis of 2008. As shown in the next exhibit, these two indexes measured both value and growth as losing the same amount, about 34%. By contrast, the inclusion of core reveals that value actually outperformed growth, and core outperformed both value and growth. This is an important insight for both portfolio construction and performance evaluation, especially in these distressed times.