Roman Chuyan, CFA's  Instablog

Roman Chuyan, CFA
Send Message
Frank Donovan, Vice President, Performance Analytics Inc. I am responsible for business development for Performance Analytics Inc., an independent firm based in Boston, which delivers actionable, results-driven asset allocation research to investment management clients. Our research reports are... More
My company:
Performance Analytics
My blog:
Active Equity Allocation - Latest Model Results
  • U.S. Equities: Changing To A Negative Expected Return 0 comments
    Apr 7, 2012 1:31 PM | about stocks: SPY, QQQ, DIA

    In March, the Performance Analytics' PAR model moved into a negative territory:

    S&P 500 (NYSEARCA:SPY) 6-month expected return:5.2%

    Recommended allocation: Underweight

    Prior month -0.8%

    Change -4.3%

    The PAR model is a factor model designed to estimate the expected equity return over a six-month period. The model is based on a dynamic multi-factor regression of the S&P 500 returns over economic, valuation and market variables. The factors are chosen each month as part of the model run, based on their statistical significance, from the set of 15 factors that have proven to be significant over time.

    The PAR model provides answers that tactical asset allocation managers need, such as:

    - What's the expected equity risk premium right now?

    - What are the factors that we should be looking at, that really affect equities?

    The PAR model went decidedly negative in March, producing the expected 6-month return for the S&P 500 of -5.2%. The model's historical back-testing data are shown in the chart above. There are no changes in the coefficient composition this month. The negative change is driven entirely by data releases, mainly by less favorable index valuation (Price/Book ratio), and by the rise in the price of oil.

    Significant Factors

    © Performance Analytics Inc.

    For more information, or for a full report, please visit us at

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SPY, QQQ, DIA
Back To Roman Chuyan, CFA's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.