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Explanation of Models

A detailed description of all model components and construction is available for free to all who are interested. Simply leave a request under contact us.

Trend Model

The Trend Model presents our position recommendations for the 180+ investable indexes in our universe.  For each index, we have separated the Short-Term score (top lines) and the Medium Term score (bottom lines).  Each of the indicators is composed of 20 distinct technical indicators with optimized parameters determined by econometric tests run in the R statistical software program.

 

Sector Allocation Model

The Sector Rotation Model applies a similar quantitative methodology as the Trend Model. In this case, the model attempts to scan a large universe of indexes and stocks in order to generate a list of candidates for inclusion in the portfolio (an “idea generator”). The Sector Rotation Model considers the risk environment and the relative trend strength indicators to calculate a new index price (“WMA index price”) which takes into account the strength of the asset relative to our dynamic, multi-asset composite benchmark (which includes the MSCI All-World index).

 

Market Risk Indicators

The Market Risk Indicators attempt to detect changes in market participants attitude towards risk. A selection of market-based data is run in panel regressions with the variables returning the highest betas retained for inclusion in the indicator.  Two dependent variables — the NYSE Index and the DJ Stoxx 600 – are used to create a risk indicator for the U.S. market and a risk indicator for the European market. We group our independent variables (available upon request) into four clusters: binomial index pairs ; volatility ; market-based indicators ; yield spreads.

 

Sentiment Indicator

Our sentiment indictor uses a mix of market-based readings and investor sentiments surveys. The components are available upon request.

 

As a final note, the Market Timing and Sector Rotation models may be customized for a client with a unique benchmark (national or specific sector). The models can also be repopulated with any universe of stocks. Contact us to discuss customization.