As investors begin to digest the extended ramifications of the coronavirus pandemic, certain investment lessons are emerging.

For one, investing globally provided diversification opportunities as different regions were impacted by the spread of the virus in different ways, according to a new paper from MSCI Inc. “The coronavirus pandemic started in Asia and gradually spread throughout the world. Even though the crisis started in Asia, the best-performing equity markets in the first quarter were Asian, as the region was also the first to start recovering from the economic slowdown.”

Companies with multinational exposure also proven resilient as the pandemic spread. Notably, companies with international revenues of over 25 per cent outperformed through the first quarter of 2020.

Looking back to March, managing factors proved to be more important than individual stock selection, the paper said. “The sharp increase in cross-sectional volatility shows that, far from indiscriminate selling, markets adjusted prices according to each asset’s factor and specific risk.”

The period was “the perfect hunting ground,” for active managers, the paper added, as certain factors well outperformed others. Momentum, size, profitability and environmental, social and governance factors showed significant excess returns, while factors like yield, level and long-term reversal fared badly.

Six of MSCI’s ESG-related indexes outperformed during the first quarter of 2020, raising the question of whether that outperformance was due to the specific objectives of the indexes or their defensive factor exposures. “Performance attribution for the first four months of 2020 using the MSCI Global Equity Model that includes an ESG factor showed that a substantial part of active return for the indexes that incorporate an explicit ESG objective was attributed to ESG (after accounting for all other country, sector and factor effects),” the paper said. “The two indexes that had climate-related objectives also outperformed in the first four months of 2020, with part of the outperformance coming from their underweight in energy stocks.”

Index strategies overall, also proved to resilient during the crisis, the paper added. Investors stuck with equity exchange-traded funds during the crisis, using them to implement active asset allocation choices. “While many exchange-traded funds experienced substantial fund flows and elevated trading volume, they continued to track their underlying indexes closely, despite the significant increase in market volatility.”