We've received some great questions about our overbought/oversold indicators (please keep them coming!). One that I wanted to discuss this week is: "Why is it that when a factor is `Oversold`, we don't always see a major decrease in the return for that factor as it reverts?" In other words, sometimes we highlight a factor as Oversold when in reality its cumulative returns are not actually...
Last week we highlighted Profitability (Quality) as a factor that was reaching an inflection point in both the US and Global markets. I wanted to provide a quick update there, as well as for the Momentum and Size factors that we've been tracking over the past couple of months.
Profitability (Global Market)
I wanted to highlight Quality as a factor that is hitting an inflection in both the US and Global markets. In our platform, Quality = Profitability, and is defined as a combination of return-on-equity, return-on-assets, cash flow to assets, cash flow to income, gross margin, and sales-to-assets.