Effective Stock Selection and Portfolio Construction Within US, International, and Emerging Markets

Frontiers in Applied Mathematics and Statistics

Beheshti, Bijan¹ 

[1] FactSet Research Systems, United States

关键词: CTEF;    GLER;    Alpha Alignment Factor;    International investing;    Portfolio optimization;   

DOI  :  10.3389/fams.2018.00017

学科分类：数学（综合）

来源: Frontiers

【 摘 要 】

In this paper, we explore the ex-post attributes of 120 simulated portfolios across the U.S., International, and Emerging Markets. We estimate expected returns using a given global stock selection model employing Global Equity Rating (GLER) and Consensus Temporary Earnings Forecasting (CTEF) signals. Our portfolios are constructed under the Markowitz optimization framework and constrained at various tracking error levels. Further, an alpha alignment factor is applied to aid in portfolio construction. As a result of our research, we present the reader with three key findings. First, GLER and CTEF signals employed as the primary inputs to security selection result in portfolios with superior risk adjusted returns relative to the Russell 3000, MSCI AC World ex. US, and MSCI Emerging Markets benchmarks which they are measured against. Second, expanding the investment universe outside the U.S. increases the opportunity set yielding higher risk adjusted performance. Third, the incorporation of an alpha alignment factor within the portfolio construction process improves risk forecasts resulting in ex-post tracking error aligning more closely to ex-ante, and ultimately improving information ratios.

【 授权许可】

CC BY