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Bright Sun Asset Management. Nigel Anderson Mattias Lundahl Jakob Midander So Sugiyama. Outline. Introduction Methodology Factors Results Dynamic weights model. Introduction. A stock selection model for large cap, US equities Limit to three factors Long and short positions

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Bright sun asset management

Bright Sun Asset Management

Nigel AndersonMattias LundahlJakob MidanderSo Sugiyama


Outline
Outline

  • Introduction

  • Methodology

  • Factors

  • Results

  • Dynamic weights model


Introduction
Introduction

  • A stock selection model for large cap, US equities

  • Limit to three factors

  • Long and short positions

  • Combine historic data and forecast results


Methodology
Methodology

  • Investment Universe: US Equities mktcap + US$ 2.5 bn  875 companies

  • January 2000 to December 2005

  • Build quintiles based on factors  monthly ptf returns

  • Score factors based on performance  new quintiles

  • Long top / short bottom quintile


Factors
Factors

  • Earnings Yield

  • Price to Book

  • EPS Forecast (IBES Consensus)


Results earnings yield
Results – Earnings Yield

  • Outperformance 5 (6) years (Eq.W ptf)

  • We assign: EarY(1) +4

    EarY(5) -4


Results price to book
Results – Price to Book

  • Outperformance 6 (6) years (Eq.W ptf)

  • We assign: P/B(1) +-0

    P/B(5) -2


Results eps forecast
Results – EPS forecast

  • Outperformance 5 (6) years (Eq.W ptf)

  • We assign: EPS(1) +-0

    EPS(5) -2


Results combined model
Results – Combined Model

  • Outperformance 5 (6) years (Eq.W ptf)

  • Consistency in result (apart from Y2003)  better than any single factor


Dynamic weights model
Dynamic Weights Model

  • High expected growth: penalize #5 portfolio less

  • Low expected growth: favor #1 portfolio less

    Yield Curve Shape is based on US Govt. 10y – 1y

    (1 month lagged)


Result dynamic weights model
Result – Dynamic Weights Model

  • Slightly better performance both buy and sell portfolio

  • Still has problem to forecast in 2003


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