Investment Discipline for Equity Market Performance

This technical report discusses the investment discipline that aims to extract performance from return dispersion in equity markets. It outlines the methodology used by Trendrating's Trend Capture Model, which has demonstrated the ability to identify outperforming stocks within various market conditions. The report presents backtest results from two investment strategies applied to Developed Europe and USA large capitalization stocks, highlighting their annualized returns compared to relevant benchmarks. Specifically, the Developed Europe strategy achieved an annualized return of 4.37% against the Stoxx Europe 600, while the USA strategy yielded 8.44% compared to the S&P 500. The report details the backtest framework, including signal and strategy backtests, and emphasizes the importance of identifying stocks that consistently outperform. It concludes by reinforcing the potential for active management to capitalize on the inherent return dispersion in equity markets, supported by empirical data from the backtests conducted over a 12-year period.