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0.4%
A momentum-driven market
has historically preceded a 0.2%
outperformance of Lo w Vo latility
value factors in the second Lo w Leverage
quarter (red bars) and the Quarterly Dividends
sharp reversal in factor Quarterly Cash Flo w
performance versus the 12 A nalyst A greement
months from March 2008 to A nalyst Estimate Revisio n
March 2009 (blue bars). On 6-M o nth P rice M o mentum
the flip side, momentum was 11-M o nth P rice M o mentum Source: Genus Institutional Equity
crushed in the second
-40% -30% -20% -10% 0% 10% 20% 30% 40%
quarter, down almost 40%.
Quantitative Insights 1
Quantitative Insights
E xhibit 4 shows that over the longer term the opportunity for high risk stocks is limited. Although
there are periods when the BMR Index outperforms, typically into a recovery (93/94, 98/99, 02/03
and 08/09 ) over the longer term these attributes do not add value. Their point of maximum risk/reward
is when the market is coming off its worst (See insert: Exhibit 3). Their performance will likely continue to
wane in the next few quarters as investors gain confidence in fundamentals and start focusing on high
quality stocks, earnings-driven valuations and positive long-term price momentum—attributes that
typically provide superior returns over an entire market cycle.
-50
The performance of risky stocks in
the past six months has been well
-100
above their historical relative norm.
-150
Exhibit 3
-200
-250
-300
Dec.92
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Quantitative Insights is published quarterly by Genus Institutional Equity, a division of Genus Capital Management
6th Floor~900 West Hastings St., Vancouver, BC, Canada V6C 1E5 T 604 683 4554 www.genuscap.com