Lazard Asset Management

JUN
Factor Report 2020

Global equity markets continued to rally from their 23 March lows as optimism over a global recovery began to build, sending
markets up over 4.5% in May. Investors were encouraged by the slow lifting of the restrictions imposed to contain the spread of the
COVID-19 virus along with additional stimulus from many central banks. Germany led the major markets as a ruling by the Federal
Constitutional Court, based in the city of Karlsruhe, challenged the European Central Bank’s stimulus plans, by requiring proportion-
ality in serving the needs of the German economy. The ruling potentially impacts Germany’s position within the European Union and,
in an extreme scenario, the future of the euro. The Japanese equity market also rose after Prime Minister Shinzo Abe declared a contro-
versial victory over the virus after only seven weeks of a modified lockdown. US equities also posted a strong May result as the major
information technology stocks led the rally. Increased efforts by China to exert control over Hong Kong sent its market down over 7%
in the month as the events of last summer seemed destined to repeat themselves. Emerging markets also lagged as strength in Latin
America was more than offset by declines in most of the Asian markets driven in part by a resumption of US-China trade tensions. Oil
prices continued to recover from their lows, but still remain well below pre-crisis levels. The US dollar weakened slightly in May.
Sector performance was led by information technology stocks, which are now positive for the year, outpacing the broader market by
nearly 14%. Consumer discretionary stocks were also strong performers as a recovery in economic activity is expected to generate
spending. Real estate and financial stocks, despite a rally in the last week remain laggards, each gaining barely over 1% in the month.
Factor performance showed a continuation of value’s ongoing underperformance in May, with large drawdowns across all markets for
the fifth straight month. Dividend yield was particularly weak as investor skepticism over dividend sustainability was evident. By con-
trast, growth factors remained in favor, particularly in the United States. Quality measures were mixed as they were strong in Europe
and Japan, but disappointed in the United States. Sentiment factors, particularly price momentum, fared well except in Japan.

Factor Returns¹ (%)

3 Months 1 Year

0 1

-2 0
Value

-4 -1

-6 -2

-8 -3
P/B P/E (trailing) Yield P/B P/E (trailing) Yield

3 Months 1 Year

6 2

3
Growth

1
0

-3 0
Hist EPS Proj EPS Hist Sales Hist EPS Proj EPS Hist Sales
Growth Growth Growth Growth Growth Growth

Global Developed United States Europe Japan Emerging Markets

As of 31 May 2020
RD00165 Source: Lazard, I/B/E/S, Standard & Poor’s, WorldScope
 2

3 Months 1 Year

3 3

2 2
Sentiment

1 1

0 0

-1 -1
Price Momentum 3 Mo. Analyst Price Momentum 3 Mo. Analyst

3 Months 1 Year

6 2

3 1
Quality

0 0

-3 -1

-6 -2
Operating ROE Leverage Operating ROE Leverage
Margin Margin

3 Months 1 Year

6 2

3 1
Risk

0 0

-3 -1

Beta Volatility Size Beta Volatility Size

Global Developed United States Europe Japan Emerging Markets

1 Month 3 Months 1 Year 5 Years

Global Market Global 4.71 -0.44 4.70 5.46

Returns (%)² Large Cap 4.42 0.22 6.03 5.86
Small Cap 6.59 -4.43 -3.03 3.05
Emerging Markets 1.26 -7.88 -5.55 1.24
United States 4.76 3.59 12.84 9.86

As of 31 May 2020
Source: Lazard, I/B/E/S, Standard & Poor’s, WorldScope
 3

Global Developed Factor Returns (%)¹

1 Month 3 Months 1 Year 5 Years
Value P/B -7.45 -4.45 -1.83 -0.51
P/E (trailing) -3.13 -1.68 -0.33 0.28
Yield -8.06 -5.09 -1.33 -0.08
Growth Hist. EPS Growth 4.29 3.17 1.30 0.38
Proj. EPS Growth 4.50 2.83 1.09 0.32
Hist. Sales Growth 5.03 3.25 1.30 0.25
Sentiment Price Momentum 4.41 -0.17 0.26 0.25
3 Mo. Analyst Up/Down 2.32 0.12 0.13 0.26
Quality Operating Margin -3.66 -2.18 -0.24 0.16
ROE 0.63 1.07 0.67 0.37
Leverage 3.08 5.38 2.06 0.57
Risk Beta 1.81 2.44 0.34 -0.08
Volatility 4.62 5.28 0.90 -0.41
Size -0.06 -1.09 0.35 0.15

US Factor Returns (%)¹

1 Month 3 Months 1 Year 5 Years
Value P/B -8.71 -6.76 -2.68 -0.71
P/E (trailing) -3.81 -2.48 -0.98 0.19
Yield -9.30 -8.23 -2.26 -0.60
Growth Hist. EPS Growth 3.60 2.27 1.28 0.24
Proj. EPS Growth 4.93 3.08 1.03 0.21
Hist. Sales Growth 3.96 2.67 1.40 0.25
Sentiment Price Momentum 3.71 0.25 0.36 0.16
3 Mo. Analyst Up/Down 4.07 0.86 0.13 0.29
Quality Operating Margin -8.16 -4.73 -1.38 -0.22
ROE -2.42 -0.72 -0.05 0.09
Leverage 3.01 4.71 1.82 0.54
Risk Beta 2.58 2.93 0.46 -0.09
Volatility 5.86 5.90 1.51 -0.36
Size 0.67 1.46 0.21 0.20

Europe Markets Factor Returns (%)¹

1 Month 3 Months 1 Year 5 Years
Value P/B -6.31 -7.45 -2.20 -0.56
P/E (trailing) -1.21 -2.37 0.10 0.58
Yield -4.88 -5.54 -1.08 0.01
Growth Hist. EPS Growth 5.37 3.92 1.43 0.55
Proj. EPS Growth 1.85 1.46 0.67 0.12
Hist. Sales Growth 4.97 5.06 1.67 0.53
Sentiment Price Momentum 5.58 3.22 1.80 1.09
3 Mo. Analyst Up/Down 1.82 0.56 0.81 0.58
Quality Operating Margin 0.86 1.38 1.13 0.72
ROE 4.51 4.12 1.70 0.79
Leverage 3.45 3.68 1.17 0.54
Risk Beta -1.45 -1.16 -0.56 -0.64
Volatility -1.03 -0.58 -1.03 -0.55
Size 0.43 0.60 0.62 -0.03

As of 31 May 2020
Source: Lazard, I/B/E/S, Standard & Poor’s, WorldScope
 4

Japan Factor Returns (%)¹

1 Month 3 Months 1 Year 5 Years
Value P/B -6.49 -5.04 -1.13 -0.49
P/E (trailing) -1.59 -1.65 0.56 0.33
Yield -3.54 -5.71 -0.62 0.17
Growth Hist. EPS Growth 3.01 2.59 1.06 0.11
Proj. EPS Growth 1.70 3.60 1.19 0.30
Hist. Sales Growth 6.63 2.37 0.65 0.11
Sentiment Price Momentum -0.65 -0.83 -0.59 -0.36
3 Mo. Analyst Up/Down -0.90 1.12 0.12 -0.43
Quality Operating Margin 1.74 0.02 0.66 0.10
ROE 4.52 2.64 0.93 0.41
Leverage 2.14 3.24 1.06 0.52
Risk Beta 2.96 2.22 0.75 -0.10
Volatility 6.14 4.48 0.81 0.06
Size -0.61 -1.24 0.00 -0.41

Emerging Markets Factor Returns (%)¹

1 Month 3 Months 1 Year 5 Years
Value P/B -4.08 -3.34 -1.97 -0.08
P/E (trailing) -2.82 -1.60 -1.05 0.63
Yield -2.16 -0.27 0.20 0.90
Growth Hist. EPS Growth 2.41 2.03 1.26 0.26
Proj. EPS Growth -1.47 -1.84 0.85 0.21
Hist. Sales Growth 0.29 -0.14 0.52 -0.12
Sentiment Price Momentum 4.34 2.39 2.77 0.81
3 Mo. Analyst Up/Down 1.55 1.16 0.18 0.47
Quality Operating Margin 1.26 0.44 0.05 0.24
ROE 0.10 1.40 0.88 0.68
Leverage 4.86 3.80 1.49 0.15
Risk Beta -1.67 0.09 0.60 0.52
Volatility 3.25 1.83 1.35 -0.07
Size 0.32 -1.13 -0.42 -0.02

As of 31 May 2020
Source: Lazard, I/B/E/S, Standard & Poor’s, WorldScope
 Lazard Asset Management

Notes
1 Factor performance is based on a universe of developed market and emerging market stocks with a market capitalization of $200mm or greater (approximately 6,000 companies).
Factor returns reflect the return differential, computed monthly, for an equal weighted composite of stocks ranked in the top and bottom 20% (quintile) for each measure shown. For example,
each month the aggregate return for stocks ranking in the bottom 20% in terms of operating margins is subtracted from the aggregate return for stocks ranking in the top 20%. The difference
is the return displayed. The monthly differences are averaged for longer time periods.
The calculation for P/B, P/E and leverage reflect the performance difference between the lowest quintile less the highest quintile. For all other measures, the difference reflects the difference
between the highest quintile less the lowest quintile. P/B is calculated as current market price divided by book value. P/E is calculated as current market price divided 1 year trailing earnings. Yield
is calculated as most recent dividend by current market price. Historic EPS Growth is calculated as a 5 year trailing earnings per share growth. Projected EPS growth is calculated as IBES analyst
forecasted 3-5 year growth in earnings per share. Historic Sales Growth is calculated on a 5 year trailing growth in sales revenue. Price momentum is calculated as the 12 month change in USD
price. 3 Mo. Analyst Up/Down is calculated as the change in the average EPS estimate over the past three months. Operating margin is calculated as net operating income divided by total reve-
nue. ROE is calculated as the net income divided by shareholder’s equity. Leverage is calculated as outstanding debt divided by shareholder’s equity. Beta is calculated against local market indices
for periods up to 36 months. Volatility is calculated on a trailing 270 day average of USD based price returns. Size is market capitalization as calculated according to MSCI.
2 Market return data is As of 31 May 2020 and is based on the following indices: Global – S&P Global BMI; Large Cap – S&P Global LargeMidCap; Small Cap – S&P Global­SmallCap; Emerging
Markets – S&P Emerging BMI; US – S&P 500

Important Information
Published on 1 June 2020.
This document reflects the views of Lazard Asset Management LLC or its affiliates (“Lazard”) based upon information believed to be reliable as of the publication date. There is no guarantee
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