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LUO’S QES MONTHLY NEWSLETTER

Quantitative Research
Economics
Portfolio Strategy

April 2018 QES Newsletter


Tone at the top? Quantifying Management Presentation
EDITORIAL

The April Edition

Welcome to the April edition of our monthly newsletter. The aim is to make it easier to access all of our published research in the past month. We summarize our most topical papers to keep you abreast of our latest work. We also highlight the latest news and investment themes with respect to Quantitative Investing, Economics, and Portfolio Strategy (QES).
FEATURED

QES Stock Selection Models

This report summarizes the suite of US and Global stock selection models that we have developed in the past two years in a number of areas, ranging from alternative data, machine learning, NLP, to corporate governance. Going forward, at the beginning of each month, we will update our models, summarize performance and highlight some our best long/short ideas. Click here for the full report.

EDITOR’S NOTE

Yin Luo, CFA, CPA
YLuo@wolferesearch.com
Gaurav Rohal, CFA
GRohal@wolferesearch.com
QES Desk Phone: 1.646.582.9230
Luo.QES@wolferesearch.com

Wolfe

London Conference

We are pleased to invite you to the Wolfe Research Global Quantitative and Macro Investment Conference taking place on Friday, 8 June 2018 in LONDON at the Andaz Liverpool Street Hotel (40 Liverpool Street - London). We have 6 speakers, mostly from academia to present their last research and findings. We will also feature a BigData panel from 5 unique and cutting-edge data vendors.
CLICK HERE TO REGISTER
CLICK HERE FOR THE CONFERENCE AGENDA
DOES THE DEATH CROSS REALLY SPELL MARKET CALAMITY?
On March 19, the 50-day moving average of Germany’s DAX index dipped below its 200-day moving average, forming a so-called “death cross”, a technical indicator commonly perceived as a strong bearish signal. The global financial markets have become increasingly integrated. A crisis in one market (e.g., the DAX, due to trade concerns) can quickly spill over into other countries. Click here for full report


Historically and especially after 2000, a death (golden) cross on the DAX has led to a significant sell-off (rally) spanning not only the German equity market but also the S&P 500/Russell 2000 indices. We also find that the golden/death cross has considerable forecasting power for the price momentum factor in most countries, the Euro, Japanese Yen, and energy-related commodities. Most assets (including most sectors in the US) suffer from substantial tail risk after a death cross.

A Research Series for Fundamental Investors – “Portfolio Compass”

QES Desk Phone: 1.646.582.9230
Luo.QES@wolferesearch.com
THE DIVERGENCE BETWEEN SECTORS AND FACTORS
Recently, economic and company fundamentals have been overshadowed by unexpected policy and political events (e.g., global trade conflicts, and public relation debacles engulfing technology firms). Risky assets such as equities and high yield bonds sold off, while US treasuries and gold held up. Sector-wise, cyclicals and financials plunged, while real estate and utilities rallied. However, style factors exhibited a completely opposite reaction. Risky factors such as book-to-market, small cap and illiquidity outperformed defensive styles (e.g., dividend yield, low beta, quality, and price momentum). Click here for full report
In a highly uncertain market, many investors look for tail risk hedging. Our machine learning/Big-Data based global stock selection model not only provides great diversification benefit during market stress episodes, but also delivers superior alpha in the long-term. Year-to-date, the LEAP model achieved positive absolute returns in nine of the 10 regions, including the US, Europe, AxJ, and China.

GENERATING ALPHA FROM THE COMPLETE EARNINGS CYCLE

Text Mining New Disclosures in the Latest 10-K Annual Filings.
Despite the recent developments on the macro and policy front, the quarterly earnings cycle remains the most decisive for active equity managers. In this report, we show that our comprehensive suite of products for advanced financial statement analysis featuring cutting edge NLP (Natural Language Processing), machine learning and alternative Big Data (e.g., management presentation, insider transaction, and regulatory filings) can help active managers generate significant alpha.

Our CEC (Complete Earnings Cycle) Model incorporates the full set of information encompassing the earnings cycle (press releases, financial statements, management presentations, regulatory filings, insider transactions, and analyst revisions). The CEC long portfolio has delivered an annual absolute return of almost 30% (compared to the Russell 3000 index of 13% during the same period). The long/short CEC strategy produces an annual return of almost 38%. The current long and short portfolios are included in the report. Click here to view full report.

Interested in our Portfolio, Infrastructure, or Custom Solution Services?


QES Desk Phone: 1.646.582.9230
Luo.QES@wolferesearch.com

Screens, Models and more...

Interested in any screens or models?
  • Objective, Systematic, Customizable, and Transparent Stock Screens
  • LEAP: Our flagship machine learning based global stock selection model
  • SMAP: Forecasting M&A targets using Alternative Data
  • CSI: Systematically identifying companies with accounting and governance irregularities
  • SPEC: Analyzing textual component of company filings for red flags
  • MRM: Objectively identifying companies with the greatest likelihood of margin expansion
  • Factor Performance: Daily factor performance
  • SMEC: Systematic Mining of Earnings Calls (SMEC) Stock Screen
  • SIRC: Interest Rate Sensitivity (SIRC) Stock Screen
Reach out to us for any assistance with your modeling or screening needs.
QES April Seminars and Lunches
Luo’s QES Team, in the past month, hosted a series of lunches and seminars in Boston, London, and Chicago to present our recent research. More than 100 buy-side professionals attended these events.

Please note that we are hosting our 2018 Annual Global Quantitative and Macro Investing Conference in London on June 8th. For details, please contact sales@wolferesearch.com.
Upcoming Conferences, Entertainment, & Travel
Event Date Organizer Location
QES New York Group Lunches 2018 (Systematic Investors) 07-May Wolfe QES New York
QES New York Group Lunches 2018 (Discretionary Managers) 09-May Wolfe QES New York
The Trading Show Chicago 2018 09-May Terrapinn Chicago
Risk ASEAN 2018 09-May Risk Jakarta
2018 Quantitative Risk Management & Financial Analytics Workshop 10-May Telfer School of Management Ottawa
2018 Applied Finance Conference 11-May FMA International New York
3rd PKU-NUS Annual International Conference on Quantitative Finance and Economics 12-May Peking University HSBC Business School Beijing
71st CFA Institute Annual Conference 13-May CFA Institute Hong Kong
QuantMinds 2018 14-May Knect Lisbon
SQA May 17th Seminar w/ Jeff Wurglur 17-May-18 SQA New York
Quantitative Finance and Financial Econometrics 2018 30-May Aix-Marseille School of Economics Marseille
QUANTITATIVE FINANCE AND RISK ANALYSIS SYMPOSIUM 2018 07-Jun Monash University Mykonos Island
Wolfe Research Global Quantitative and Macro Investment Conference 08-Jun Wolfe QES London
SoFiE Conferences ¦ 11th Annual Meeting in Lugano 12-Jun Swiss Finance Institute Lugano
STAC Summit Spring NYC 2018 13-Jun STAC New York
Battle of the Quants NYC 2018 20-Jun battleofthequants.com New York
BattleFin Discovery Day Intrepid 21-Jun BattleFin New York
CQA Quantitative Trading Seminar 2018 21-Jun CQA - Chicago Quantitative Alliance New York
Evidence-Based Investing Conference 2018 24-Jun IMN Dana Point
Global Indexing and ETFs 2018 24-Jun IMN Dana Point

LOCAL AND INTERATIONAL NEWS

Over 500 buy-side investment professionals attended our 2017 QES Conference.
View the Conference Proceedings

TechByte

This is nothing but evolving wireless networks. The internet of things is the interconnection via the Internet of everyday devices. From vehicles, home appliances, wearables, sensors, actuators, to jet engines, the internet of things enables such devices to connect and exchange data. The market is expected to grow from $170 billion in 2017 to $561 billion by 2022, as a result of advancements in analytics and data processing techniques.
Source: yourstory.com

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