Active Quant: Applied Investment Research in Emerging Markets

Abstract

Active quantitative models for stock selection use analysts’ expectations, momentum, and fundamental data. The authors find support for simple and regression-based composite modeling using these sources of data for global and emerging market stocks during the period 2003–2016. They also find evidence for the use of Axioma multifactor models for portfolio construction and risk control. The authors create portfolios for the period January 2003–December 2016. They report four conclusions: 1) analysts’ forecast information was rewarded by the global market between January 2003 and December 2016; 2) analysts’ forecasts can be combined with reported fundamental data, such as earnings, book value, cash flow, and sales, and also with price momentum, in a stock selection model for identifying mispriced securities; 3) emerging markets efficient frontiers dominate non-U.S. and global efficient frontiers; and 4) the portfolio returns of the multifactor risk-controlled emerging market portfolios are consistent with real-time emerging market excess returns. <b>TOPICS:</b>Security analysis and valuation, statistical methods, global