Quantitative Stock Rating Model: Performance and Discussion

Our quantitative stock rating model, launched at the beginning of this year, uses composite factors across five dimensions (value, quality, momentum, estimates, and investment) to predict individual stock performance. The stock rating model produces a list of 100 favored investments from across the S&P 500.

The model enjoyed its best month of the year in November, as its basket of favored stocks outperformed the S&P 500 index by 3.0%. Year-to-date, the favored basket has outperformed the S&P 500 by 8.4%. Fig. 1 shows the performance of the basket of favored stocks and the S&P 500 by year, starting in 2001.

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Fig. 2 shows the performance for each of the 5 composite factors that make up the stock rating model (blue bars), along with the performance of the overall model (orange bar at right) during November. Of the five composite factors, four outperformed the overall index. The quality composite led...

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