Robeco analyzes how equity factor styles behaved during the Spanish Flu alongside World War I, using extended historical data to study market stress before modern datasets. The findings challenge diversification assumptions, showing correlations spiked and protection was limited, while small caps lagged in the drawdown but led the recovery that followed.
Equity Styles And the Spanish Flu
Robeco
Guido Baltussen, Pim van Vliet
Research
5 Pages
Key Takeaways
Market Drawdown Dynamics: Equities fell about -20% from November 1916 to November 1917, with most styles declining together as correlations increased and diversification benefits weakened.
Defensive Factors Limited: Low volatility and high dividend stocks reduced losses but still declined materially, offering less downside protection than seen in other historical corrections.
Small Cap Rebound Strength: Small caps underperformed during the downturn but delivered the strongest gains in the recovery through February 1919, reversing earlier losses.
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