Our Latest Regional Equity Valuation Model Captures Coronacrisis Recovery Differences

regional model 1

#ActiveAllocator develops state of art algorithms to capture different rates of coronacrisis recovery within countries and international equity markets. Here is the general design idea. We naturally also include multiple other proprietary dynamic factor drivers specific to coronavirus trackers, which are not shown here.

The objective is to rank the attractiveness of regional equity markets over a 12-month time frame

  • The ranks are based on a composite score
  • The composite score is a weighted average of individual ranks for various factors:
  • Valuation factors include Forward PE, PEG, Price to Book and Yield Gap
  • For each valuation factor we
    • Generate for each region a z-score (current level – 15 year historical average / standard deviation over that 15 year period) .
    • Rank the regions based on their z-scores, in other words based on how far the current valuation is from the historical norm (for most factors a low score ranks highest, but for Yield Gap a larger number ranks highest)
    • Momentum factors include earnings revision breadth and earnings revisions depth. Larger, positive numbers rank highest
    • Use different factors and different weights for developed markets and emerging markets

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech ActiveAllocator.com, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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