Quantitative Research
Portfolio Strategy

January 2018 QES Newsletter


The Inaugural Edition

Welcome to the inaugural 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).

The Silk Road to China

MSCI’s recent announcement to add China A stocks into the MSCI Emerging Market Index has stirred up investors. In this publication, we discuss the unique features of the China A market that makes it challenging for institutional investors. We show how data science and quantitative tools can be employed for stock selection. Lastly, we develop a suite of investable China A strategies. Click here for the full report.



Yin Luo, CFA, CPA
Gaurav Rohal, CFA
QES Desk Phone: 1.646.582.9230

Introducing D2

D2 is a database of databases, including a comprehensive list of over 700 datasets (both alternative and traditional), analytical platforms, technology systems, and tools in investing. We have intelligently tagged each data vendor by asset class, sector, region, subject, and data frequency, enabling fast filtering and selection by each client’s own interest. Click here for the full report

Reach out to us if you want access to D2


The Buy Side Sentiment
Our top-ranked transport analyst team has been conducting a quarterly survey with the buy-side investment community since 2014. The survey covers almost 30 stocks from the transport sector and is based on the feedback from 50-100 of the largest asset management firms. In this research, we backtest the survey data and combine with our quantitative models.

We construct simple sentiment indicators based on the survey data. We find that stocks with stronger EPS Sentiment deliver 2.5% higher earnings surprise. Reach out to us for our Transport screen.

Introducing a Research Series for Fundamental Investors – “Portfolio Compass”

QES Desk Phone: 1.646.582.9230
Rebuilding America’s Infrastructure
We continue to explore the use of Alternative Big Data on the global macro front. We study the Dodge US Construction Activity (UCA) database, probably the largest and most reputable provider for US construction industry data. We develop a suite of 38 construction factors (such as construction spending growth, and unconventional sentiment indicators – the ratio of project value/count in non-planning stage over the planning stage) based on the PLC dataset and test their relationship to future economic conditions. Click here for the full report.
We find our construction factors are timelier and lead the actual government reported data. Furthermore, our factors are predictive of future economic cycles and asset returns.


On November 29, the market exhibited a significant sector and style rotation event. The one-day shocks on November 29 exceeded two-standard deviation event. We study how the sell-off impact the risk and return of the momentum factor in the near term. Click here for the full report.

Our conclusions are still bullish on the momentum style, but we do want to warn investors of the potential downside risk.

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

QES Desk Phone: 1.646.582.9230
Our proprietary parking lot traffic indicator based on satellite imagery is signaling a potential negative sales surprise for DKS, due to negative growth in quarterly YoY traffic. However, the latest measures for HD and LOW show that quarterly YoY traffic growth has been positive, signaling that a negative sales surprise is unlikely. Click here for the full report.
We find that satellite imagery data tends to be more useful for home improvement retail and specialty stores possibly due to their higher in-store purchasing conversion rates and higher customer traffic during the mid-morning/early-afternoon hours when satellite imagery is captured.

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
Reach out to us for any assistance with your modeling or screening needs.
Seasonality in Asset Allocation; A Study on the Inverted Yield Curve
The US treasury yield curve has been flattening since mid-2009. We find that the yield spread is negatively correlated with future economic growth. An inverted yield curve is highly predictive of recessions in the next 12 months. The current slope of the yield curve, however, is still positive, suggesting negligible probability of a recession. Click here for the full report.
Our TAA models favor US large-cap, and DM and EM equities, while they are cautious on US treasuries, crude oil, and US small-cap. Sector-wise, we currently overweight info tech, financials, and consumer discretionary; and underweight energy, utilities, and real estate.
Upcoming Conferences, Entertainment, & Travel
Event Date Organizer Location
XIX Workshop on Quantitative Finance (QFW 2018) 24-Jan University of Roma Tre Rome
BattleFin, MIAMI 2018, Javed Jussa 30-Jan BattleFin Miami
FOW Derivatives Israel 2018 6-Feb Global Investor Group Tel Aviv
2018 Consortium on Trading Strategies and Institutional Investing 6-Feb FMA International Cambridge
Asset Management Derivatives Forum 2018 7-Feb FIA Dana Point
Actuarial and Financial Mathematics Conference 2018 8-Feb Ghent University Brussels
TradeTech FX US 2018 12-Feb Worldwide Business Research Miami
ASU Sonoran Winter Finance Conference 2018 15-Feb Arizona State University Scottsdale
World Exchange Congress 2018 27-Feb Terrapinn Muscat
Machine Learning & AI in Quant Finance Conference NYC 2018 1-Mar QuanTech New York
European Winter Finance Summit 2018 4-Mar University of Zurich St. Moritz
FOW Trading Amsterdam 2018 7-Mar Global Investor Group Amsterdam
Quant Summit Europe 2018 7-Mar Incisive London
FX Week Australia 2018 15-Mar FX Week Sydney
EMEA Trading Conference 2018 15-Mar FIX Trading London
Machine Learning & AI in Quant Finance Conference London 2018 15-Mar QuanTech London
2018 Napa Conference on Financial Markets Research 23-Mar FMA International Napa Valley


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


Love it or hate it, but you can't ignore crytocurrency. Investors, be it retail or institutional, are jumping into this phenomenon. While the underlying technology block chain is interesting and possibly a game changer, it is very hard to predict who will emerge as the winners when the dust settles. The dominance of bitcoin has been shrinking lately as some of its shortcomings are surfacing -- high economic and environmental cost of bitcoin transactions is concerning. New tokens will continue to come in and out of favor, only time will tell who will stay standing and who will fall.