Quant signals for EU equity sectors and styles
The amount of available information has never been so large and the effort required to analyze all the investment opportunities entails prohibitive costs. As a result, it has become a common practice to apply first a top-down approach in determining the most promising regions or areas in a given market.
- Focal Point
- 18/12/2019
Highlights:
- We introduce our proprietary equity valuation tool which provides indications of over- or undervaluation for different sectors and styles of European equities.
- The regression-based models use macro and financial variables to provide fair value estimates of the ratio between the MSCI Europe Sector/Style index and the broad MSCI Europe index.
- Each model is back-tested to ensure the viability of the derived buy/sell strategies. We analyzed the relative performance of each sector/style at different levels of over and undervaluation and over different time spans (1, 3, 6 and 12 months). Generally, the models have the best performance in the 6 to 12 month horizon.
- Currently, financials, telecommunications, energy and utilities look undervalued while industrials, materials and IT appear overvalued. Among the European equity styles, undervaluation is indicated for value, small cap and large cap value while growth, cyclicals, low leverage and large cap stocks look too expensive.
Read the full publication below.
RELATED INSIGHTS
US INFLATION: RISING, NOT SOARING
Since the beginning of the year financial markets have started increasingly to worry about a sudden and strong re-turn of US inflation. Behind this stands the double boost from domestic demand coming from the widely expected re-opening of the economy in spring and the large fiscal stim-ulus the incoming Democratic administration will most likely deliver.
READ NOW
CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
