Quantitative Research

Our quantitative research is designed to help portfolio managers make better decisions by exploiting recurring aspects of human nature, which can manifest themselves in valuation and in the behavior of managements and investors. We have found that creating and applying quantitative models is worthwhile everywhere, especially outside the U.S., where markets are less efficient and there is less capital devoted to model-based trading. In developing our global quantitative services, we leveraged the experience of our team, which has been researching quantitative concepts in the U.S. since the early 1990s. Globalization and the growth of traders have altered the playing field elevating the need for informed judgment, and stock selection models must be more adaptive than before. We’ve developed distinct approaches for each region and investment style, and they attempt to capitalize on different anomalies. For example, we look for excessive pessimism by value investors and skepticism by growth specialists.

Our modeling frameworks balance conflicting signals in a dynamic fashion, putting greater emphasis on the factors with the highest expected return at each point in time. We believe the primary value of quantitative frameworks lies in the melding of disparate signals. Given the vagaries of operating across multiple regions, the usefulness of any single tool is dependent on the investing backdrop. What’s been efficacious in stock picking in the developed markets is different compared to the emerging markets, and our models reflect that. There is no substitute for judgment and experience in deciding what to emphasize and when.

Our quantitative tools are the product of ongoing research and are periodically revised. The process is evolutionary in our view, and we believe much of the art involved is in determining when to take the next step. While the principles are immutable, the way they manifest themselves is not. Our models are labor-saving devices, providing clients an expected return for each stock, as well as a general framework to interpret the constant flow of investment information. We have general stock selection models and specific ones designed to spot failure. We work with clients to develop modeling solutions specific to their needs. That collaboration is critical to our process and the success of the relationship.

Stock Selection Models

  • U.S. Stock Selection Models
  • Global Stock Selection Models

 

Failure Models