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Bright Sun Asset Management

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

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  1. Bright Sun Asset Management Nigel AndersonMattias LundahlJakob MidanderSo Sugiyama

  2. Outline • Introduction • Methodology • Factors • Results • Dynamic weights model

  3. Introduction • A stock selection model for large cap, US equities • Limit to three factors • Long and short positions • Combine historic data and forecast results

  4. 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

  5. Factors • Earnings Yield • Price to Book • EPS Forecast (IBES Consensus)

  6. Results – Earnings Yield • Outperformance 5 (6) years (Eq.W ptf) • We assign: EarY(1) +4 EarY(5) -4

  7. Results – Price to Book • Outperformance 6 (6) years (Eq.W ptf) • We assign: P/B(1) +-0 P/B(5) -2

  8. Results – EPS forecast • Outperformance 5 (6) years (Eq.W ptf) • We assign: EPS(1) +-0 EPS(5) -2

  9. Results – Combined Model • Outperformance 5 (6) years (Eq.W ptf) • Consistency in result (apart from Y2003)  better than any single factor

  10. 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)

  11. Result – Dynamic Weights Model • Slightly better performance both buy and sell portfolio • Still has problem to forecast in 2003

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