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New S&P Capital IQ Model Identifies Drivers of Return for Obtaining an Edge in Emerging Markets

NEW YORK, Feb. 7, 2014 /PRNewswire/ -- Recognizing the importance of global emerging markets and investors' heightened focus on them, S&P Capital IQ, a leading provider of multi-asset class data, research and analytics, has recently completed research on the historical drivers of return in emerging markets and developed a new stock picking model that leverages these insights. This research, authored by Temi Oyeniyi, Li Ma and Vivian Ning, follows the introduction earlier this year of a set of global stock selection models for developed markets.  For a copy of S&P Capital IQ's latest research report, "Obtaining and Edge in the Emerging Markets," produced by the firm's quantamental research unit, click here.

"For Investors concerned about how to position their portfolios given the recent sell-off in emerging markets, our research suggests that the strongest signals for generating excess returns in these periods are those that measure how efficiently a company uses its capital and also how "cheap" the security is relative to its peers," stated Dave Pope, Managing Director and Editor of the report.  "Stocks with a high return on equity, low to moderate leverage and attractive valuation multiples have historically performed better than the broad emerging market universe when emerging markets have lagged developed markets significantly," added Mr. Pope.

"Some of the key findings our research uncovered were that valuation and quality strategies were the most effective within emerging markets over the study period (January 2002September 2013)," said Temi Oyeniyi, Director at S&P Capital IQ and one of the authors of the report.  "Overall, the model generated an annualized equal-weighted top quintile excess return of 11% within the broad based S&P BMI Emerging Market Index, and performance was identical when we restricted our universe to the largest 50% of names by dollar market capitalization in the index," added Mr. Oyeniyi.

Other findings in the S&P Capital IQ emerging markets report include:

  • The model's performance is robust across regions with the best annualized equal-weighted top quintile excess return seen in Asia ex China & Taiwan (13%)
  • Model performance is identical in growth and value environments, and positive in periods of elevated volatility (7% annualized top quintile excess return). 
  • A trading strategy using the alphas of the model yielded an annualized excess return of 10% after accounting for transaction costs. 

S&P Capital IQ's quantamental research focuses on actionable investment strategies for global equity investors.  The audience for its research includes US and global buy-side, hedge fund, family office, and high net worth investors.

About S&P Capital IQ

S&P Capital IQ, a business line of McGraw-Hill Financial (NYSE:MHFI), is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, and identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as the S&P Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Capital IQ Valuations; and research offerings, including Leveraged Commentary & Data, Global Markets Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need. For more information visit: www.spcapitaliq.com.

All information provided by S&P Capital IQ is impersonal and not tailored to the needs of any person, entity or group of persons.  Past performance is no indication of future results. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you nor is it considered to be investment advice. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.

SOURCE S&P Capital IQ

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