The PAR Model™ is the proprietary factor model that Performance Analytics uses to forecast equity returns over a six-month period. The model is based on a dynamic multi-factor regression of equity index returns over economic, valuation, and market variables. Factors are chosen automatically each month based on their statistical significance from the initial set of factors (22 in the case of the S&P 500) that have proven to be significant over time. Forecasts are revised twice a month.
Roman Chuyan, Founder and President of Performance Analytics, explains:
“An asset class with double-digit six-month potential return is very attractive to most investors (assuming risk is properly accounted for). And very rarely do expected returns approach 20%. In fact, the last time in backtesting the PAR Model™ forecast was as high was in the first half of 2009. Actual S&P 500 returns followed suit, with six-month total returns being above 20% in every six-month period that started between January and June of 2009, and as high as 40% starting in February 2009. Neither actual nor expected returns have been as high in any other period in the last decade –until this month’s forecast of 19.2%. That’s why we think that this month’s result from the model indicates a buying opportunity that happens only a couple of times in a decade.
“We are available to our clients with additional details to help them get comfortable with this result. Once the needed diligence is completed, we encourage clients to take advantage of this opportunity in their fund strategy.”
For complete details on the attribution of the factors leading to the forecast, a one-month free trial to the PAR Model report is available to investment professionals at: http://parmodel.com/
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 how the PAR Model™ helps with tactical asset allocation, visit the firm's web site (http://parmodel.com/
Frank Donovan, VP Business Development
Performance Analytics, Inc.