Economics & Strategy – Quantitative Research: Second

After three years in first place, the J.P. Morgan team slips to second. Newcomer Robert Smith shares leadership responsibilities this year with Sai Kuen (Tony) Lee. The analysts have “a very good sense of what quantitative equity portfolio managers want,” according to one client. “Their research is generally reasonable, testable and easily implementable, which is a great help.” The crew developed the firm’s proprietary Q score, which evaluates companies based on ten factors, including earnings, investor sentiment and valuation; the higher a company scores, the greater its stock’s expected return relative to its peers’. The quant strategists recalculate scores on a daily basis and deliver weekly summaries; among the names identified in March as likely outperformers are India’s HCL Technologies, an information technology services provider, and Sun Pharmaceutical Industries; Indonesia’s Bank Mandiri; and Thailand’s Bank of Ayudhya and Krung Thai Bank — all of which are rated overweight. Market conditions are much more favorable for quant investing this year than last, Smith says, “so we are seeing more consistent returns to the typical quant factors that play a part in most multifactor approaches.” — Katie Gilbert