Performance Analytics describes that the new PAR Model™-Canada has the following characteristics:
Canadian equities are represented by the S&P/TSX 60 index.
The model is based on 15 factors, including Canadian macroeconomic indicators, factors that capture investor demand, and commodity prices. The correlation with the U.S. market is captured in the model via two cross-country factors.
The Information Coefficient (IC) obtained in backtesting the model, is 0.79.
Roman Chuyan, Founder and President of Performance Analytics, explains:
"There are two ways for active managers to add value in public markets: security selection and tactical asset allocation. Just as security selection is based on forecasting of prospects for individual securities, TAA is based on forecasting asset class risks and returns. Such forecasts better be based on systematic quantitative methods rather than on judgment. Our mission at Performance Analytics is to help investment managers of all sizes obtain such TAA capabilities, which helps them deliver better performance”
“The addition of the Canadian model will enable Canadian public and corporate pension funds and other Canadian managers to perform TAA. Global managers who focus on North American equities will get the added coverage”.
“Using multiple models improves robustness of the approach through diversification across markets, and across models. Our country models are very different from each other, as they include factors specific to each country’s economy. Looking at multiple model’s forecasts also gives managers additional insight. For example, right now, both our U.S. and Canadian models forecast double-digit six-month returns”.
About Performance Analytics Inc.
Performance Analytics, based in Boston, provides research to asset management firms. Using its unique PAR Model™ for equities, Performance Analytics performs risk and return forecasting for equity indices. This actionable, result-driven research helps managers improve their risk-return performance through tactical asset allocation.
For more information on the PAR Model™, visit the firm's web site.
Frank Donovan, VP Business Development
Performance Analytics, Inc.