ETFG Research Overview
ETFG Research Philosophy: ETF Global provides independent and objective research enabling investors to generate superior risk-adjusted returns balanced by disciplined risk management. Developed over many years, the ETF Global dynamic, quantitative research models integrate Fundamental Analysis, Behavioral Finance, Global Sentiment, Qualitative Evaluation and Risk Management.
Fundamental valuation and behavioral finance are often viewed as divergent approaches; however, research suggests important connections. For instance, the success of value investing largely depends upon the time it takes for asset prices to revert to their mean with that time horizon measured in years. This creates inefficiencies in the market that can be exploited in the near-term. Behavioral finance can provide important clues about the transitional dynamics between an asset’s fundamental value and short-term price swings. Our proprietary models find the important connections between the two disciplines to generate superior returns.
Our consistent, disciplined research models, utilized across our suite of applications, integrate four key areas central to our research process:
- Fundamental Valuation: A proprietary, multifactor model screens through fundamental data within the ETF universe; Including P/E, P/CF and P/B ratios, dividend yields and historical risk/return relationships.
- Behavioral Finance: An analysis of behavioral factors involving the use of technical research and investor sentiment readings developed and refined over many years. Primarily focused on momentum, money flows and moving averages.
- Global Themes: In depth review of macroeconomic conditions across the world relying on information from third party sources such as various NGOs. Focused on economic indicators, business cycle and industry/sector trends both domestically and internationally.
- Risk Management: The cornerstone of our philosophy. The primary focus is to protect against surprises. In addition to analyzing the sponsors of ETFs, we also look at the management and trading characteristics of every ETF. We score the composition and liquidity of each as well as measures relating to volatility and deviation.
The ETFG® Quant Model
The research platform is driven by the company’s proprietary Quantitative Model which harnesses the power of algorithms within "Big Data." With roots in Machine Learning, 2016 marked a quantum leap for the firm as it deployed its first elements of Deep Learning Artificial Neural Networks within the ETFG® Quant Model.
The universe of equity ETFs reviewed by ETFG Quant represents the broadest range of industry groups, sectors and geographic regions. The ETFG Quant model assigns a daily ranking to all relevant products using proprietary algorithms and employing dozens of industry metrics to gauge how likely an equity ETF will outperform the market in the foreseeable future. ETFG Quant has four primary drivers within the model: Behavioral Finance (Technical Analysis & Sentiment), Fundamental Analysis, Global Themes and Quality.
For more detailed information regarding the ETFG Quant Model, please review the ETFG Quant White Paper under the Quant button.