Top Analysts:
An analyst qualifies as a "Top Analyst" if they meet all the criteria listed below.
- Only analysts/Investing Group leaders with at least 5 unique actionable recommendations on qualified securities in the trailing 12 months are included in the analysis.
- Actionable recommendations include Strong Buy/Buy/Sell/Strong Sell ratings.
- Qualified securities include common/ordinary shares, ADRs, and ETFs with a market capitalization greater than $20 million USD.
- Performance is calculated during the holding period, which is defined as the time period in which an actionable recommendation is active.
Recommendation Methodology:
- Strong Buy: Highest buy conviction an analyst can have. When an analyst gives this rating to a security, it is added to their “pick list,” and their holding period begins. The return for a Strong Buy rating is measured by the change in price of the qualified security after the Strong Buy rating is made. For purposes of conviction-based active return, the return is multiplied by +1.5.
- Buy: When an analyst assigns this rating to a security, it is added to their “pick list,” and their holding period begins. The return for a Buy rating is measured by the change in price of the qualified security after the Buy rating is made. For purposes of conviction-based active return, the return is multiplied by +1.
- Hold: When an analyst initiates coverage on a security with a Hold rating, it is not considered. However, when an analyst has made an actionable recommendation on a security and then gives a Hold recommendation, the holding period ends.
- Sell: When an analyst assigns this rating to a security, it is added to their “pick list,” and their holding period begins. The return for a Sell rating is measured by the change in price of the qualified security after the Sell rating is made. For purposes of conviction-based return, the return is multiplied by -1.
- Strong Sell: The highest level of sell conviction an analyst can assign. When an analyst gives this rating to a security, it is added to their “pick list,” and their holding period begins. The return for a Strong Sell rating is measured by the change in price of the qualified security after the Strong Sell rating is made. For purposes of conviction-based return, the return is multiplied by -1.5.
Ranking Methodology
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- Analysts are ranked using a combination of the “Fundamental Law of Active Management” and their conviction-based active return.
- Fundamental Law of Active Management = Information Coefficient * √ Breadth
Information Coefficient = (2 x Proportion of predictions made correctly by the analyst) - 1
Breadth = Number of actionable recommendations made by an analyst.
- Fundamental Law of Active Management = Information Coefficient * √ Breadth
- Conviction-based active return = The average return of all actionable recommendations with Strong Buy returns multiplied by 1.5 and Strong Sell returns multiplied by -1.5.
- Therefore, the ranking of an analyst depends on:
- Security selection skill.
- Conviction in security selection.
- How often an analyst successfully applies their skill.
- Analysts are ranked using a combination of the “Fundamental Law of Active Management” and their conviction-based active return.