Frequently Asked Questions about Haugen Equity Signals
What does Haugen Equity Signals do and what does it not do?
Haugen Equity Signals provides value added signals for a broad range of equities from which a virtually unlimited number of long and or hedged portfolios can be constructed.
At present, Haugen Equity Signals does not provide model portfolios or manage money. These additional value added services, may be provided at some point in the future.
What are the core market beliefs of Haugen Equity Signals?
1. We believe that markets are highly inefficient and therefore active managers can add significant value, net of fees, over market cycles. This value added is based on the analysis of a broad range of equities.
2. We believe that this value added can only be achieved by studying a broad range of equity securities.
3. Volatility is a critical component in understanding market behavior better and calculating payoffs.
4. Payoffs for individual factors vary over time and therefore require continuing analysis.
How does the Haugen Model work?
Each year Haugen Equity Signals creates a universe of stocks in each of the four markets that we track (i.e. U.S., European, Japanese and emerging markets) and determines the top stocks in each group based on market capitalization and liquidity. At the end of each month the stocks are put through advanced statistical modeling algorithms, producing a projected “payoff” or “score” for over 60 different factors for each stock. For example, if in a given month the payoff for the book-to-price factor is negative, this means that in that month the model is favoring companies with low book-to-price values over stocks with high book-to-price values.
To calculate the expected returns, we get the latest data in order to look at each stock’s current exposure level to each factor, multiply by that month’s projected payoffs for each factor, and then add these 60 numbers up. These expected return results are then ranked from lowest to highest in order to provide the stock rankings.
Because of its level of detail, the Haugen Model is able to replicate the kind of “feel for the markets” that experienced money managers demonstrate. In the long run, the model favors portfolios of stocks that are in the aggregate relatively cheap, profitable and liquid.
How risky is the Haugen Model?
The Haugen Model produces pure expected returns, unadjusted for risk. As such, the performance can be considerably higher than competitors’, but more risky. Most managers who use this data also use a risk optimizer to ensure a smoother ride.
What makes Haugen Equity Signals unique?
Haugen Equity Signals has a single-minded focus on quantitative research. It’s all we do. In fact, over 20 years ago Haugen was the first to create an expected return factor model. Since then we’ve been improving and perfecting the Haugen Model…a model which has proven over time to add alpha to almost any portfolio.
Do you "put your money where your mouth is" and personally invest based on your predictions?
Yes. Each month after the data is sent out, the President of Haugen Equity Signals adjusts his own retirement account portfolio based on the signal that we send out to our clients.
Do you have actual performance data for clients who use your model?
Yes. One of our clients has chosen to share their performance data with us. This information is available upon request.
Since Bob Haugen is no longer alive, what keeps the model from getting stale?
Bob Haugen’s work is being continued at the same high level by Brian Boyer, PhD, who works as a professor of finance at Brigham Young University. He routinely develops new ideas for improving the model. These ideas are back-tested and vetted for data mining and other biases before being incorporated into the model that we use.
What does it cost?
Haugen Equity Signals offers a choice of three different pricing structures, all of which include daily data for all 13,000 of the stocks that we track. Choose the pricing option that works best for you:
- Flat fee – Based entirely on your assets under management OR
- Flat fee + performance-based – Partially based on your assets under management plus partially based on your portfolio’s performance OR
- Alpha-based – A portion of the Alpha produced for your portfolio by our model.
In addition, customized/proprietary versions of the Haugen Model can be built. You can also have an additional exclusive weekly or monthly run of the data on the trading day of your choice, giving you data that no one else gets. Please inquire about details and pricing.
For detailed performance history or information on how to subscribe to the Haugen Model call (888) 447-5169.