How the Model Works

1. At the End of each month, using a trailing history for each of our 70+ factors, we use a statistical calculation to estimate the projected payoff to each factor for all stocks in the coming month.  Payoffs for all factors are estimated simultaneously.
2. Next we calculate the contribution of each factor to each stocks expected return for the coming month using the following formula:
   

   Projected payoff for factor #1 for all stocks for the coming month

   X

   Each stock's exposure to factor #1 as of the last day of the most recent month

   =

   #1's contribution to expected return for each stock for the coming month

3. The model computes this formula for all factors and then sums all factor components for each stock.
4. Finally we rank each stock based on its expected return for the coming month.