- Action "The credit crisis that originated in the US has generated a rebalancing of global investments from the West towards the East. Over the past year, we see a growing impact from Asia on the rest of the world. On quant factor investing, we highlight the performance differences between developed and emerging markets in Asia."
- Recent market specifics "The credit crisis that originated in the US has generated a rebalancing of global investments from the West towards the East. Since October 2008, the MSCI AC Asia Pacific ex-Japan index has outperformed the MSCI regional indices in the US and Europe, and there has been a growing impact from Asia on the rest of the world. Over the past year, we have seen the continuation of the uptrend in weights of Asian markets, impressive fund inflows to the region, and increased fund-raising activities by IPO. These all reflect a shifting investment preference to Asian markets."
- Changes in return attributions "We extend our return attribution analysis for Asia Pacific equities and estimate changes in the stock returns attributable to four factors: the global market, country-, sector- and stock-specific factors, over the past year. We see the continuation of the rising global factor effect on Asia equities when the global market recovered from the previous recessionary trough. Meanwhile, there is a significant decrease in the spread between country factor and sector factor effect in emerging Asia, signalling a converging characteristic of emerging Asia to the developed markets. Our analysis also suggests that the performance impact from Asia on the US/European markets has grown over the past few years, and it is almost the same level as that from US/Europe on the Asian markets."
- Investment factors that work "Developments in financial market infrastructure, together with improved market depth, provide opportunities to invest in the region using quantitative approaches, in our view. We look at the factor performances in developed and emerging Asia, respectively. In the long run, the factor effectiveness in emerging Asia has been
more consistent than that in developed Asia, especially for value investing and earnings-revision indicators. The differences are more evident when we look at different market cycles. After the credit crisis, the utility of quant factors for investing continues look more promising in emerging Asia than that in developed Asia, with significant alphas generated from valuation devices such as E/P and B/P, and earnings revision indicators such as normalised earnings yield and revision index in emerging Asia."
- Recent market specifics "The credit crisis that originated in the US has generated a rebalancing of global investments from the West towards the East. Since October 2008, the MSCI AC Asia Pacific ex-Japan index has outperformed the MSCI regional indices in the US and Europe, and there has been a growing impact from Asia on the rest of the world. Over the past year, we have seen the continuation of the uptrend in weights of Asian markets, impressive fund inflows to the region, and increased fund-raising activities by IPO. These all reflect a shifting investment preference to Asian markets."
- Changes in return attributions "We extend our return attribution analysis for Asia Pacific equities and estimate changes in the stock returns attributable to four factors: the global market, country-, sector- and stock-specific factors, over the past year. We see the continuation of the rising global factor effect on Asia equities when the global market recovered from the previous recessionary trough. Meanwhile, there is a significant decrease in the spread between country factor and sector factor effect in emerging Asia, signalling a converging characteristic of emerging Asia to the developed markets. Our analysis also suggests that the performance impact from Asia on the US/European markets has grown over the past few years, and it is almost the same level as that from US/Europe on the Asian markets."
- Investment factors that work "Developments in financial market infrastructure, together with improved market depth, provide opportunities to invest in the region using quantitative approaches, in our view. We look at the factor performances in developed and emerging Asia, respectively. In the long run, the factor effectiveness in emerging Asia has been
more consistent than that in developed Asia, especially for value investing and earnings-revision indicators. The differences are more evident when we look at different market cycles. After the credit crisis, the utility of quant factors for investing continues look more promising in emerging Asia than that in developed Asia, with significant alphas generated from valuation devices such as E/P and B/P, and earnings revision indicators such as normalised earnings yield and revision index in emerging Asia."
Nomura Quantitative Landscape 20100818
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