1. Bright Sun Asset Management
Nigel Anderson Mattias Lundahl Jakob Midander So Sugiyama

2. Outline
Introduction
Methodology
Factors
Results
Dynamic weights model

3. Introduction A stock selection model for large cap, US equities
Limit to three factors
Long and short positions
Combine historic data and forecast results

4. Methodology
Investment Universe: US Equities mktcap US$ 2.5 bn  875 companies
January 2000 to December 2005
Build quintiles based on factors  monthly ptf returns
Score factors based on performance  new quintiles
Long top / short bottom quintile

5. Factors
Earnings Yield
Price to Book
EPS Forecast (IBES Consensus)

6. Results – Earnings Yield
Outperformance 5 (6) years (Eq.W ptf)
We assign: EarY(1) +4
EarY(5) -4

7. Results – Price to Book Outperformance 6 (6) years (Eq.W ptf)
We assign: P/B(1) +-0
P/B(5) -2

8. Results – EPS forecast Outperformance 5 (6) years (Eq.W ptf)
We assign: EPS(1) +-0
EPS(5) -2

9. Results – Combined Model
Outperformance 5 (6) years (Eq.W ptf)
Consistency in result (apart from Y2003)  better than any single factor

10. Dynamic Weights Model High expected growth: penalize #5 portfolio less
Low expected growth: favor #1 portfolio less
Yield Curve Shape is based on US Govt. 10y – 1y
(1 month lagged)

11. Result – Dynamic Weights Model
Slightly better performance both buy and sell portfolio
Still has problem to forecast in 2003