The selection of equities, listed on NYSE and NASDAQ, is updated dynamically by machine learning at market closure every night
Stocks are screened for below average volatility over a full year and over the most recent 3-months period
The selection is controled for above-average performance, positive earnings yield and constrained financial leverage
Volatility / Peformance Arbitrage
- Volatility, a measure of risk exposure, ranks the selection with assets exhibiting the most favorable track record of below-average risk (both over the past year and over the quarter)
- Performance, normally weaker for low risk assets, is screened for above-average return over the past 60 trading days (corresponding to 3 months)
Earnings yield
- Yield is measured as return on capital invested, shareholder capital and total debt, screened for above-average rankings
- Relating earnings to the total value of a company from all sources financing its operations, yield signals effective use of company assets
Debt leverage (D/E)
- Financial leverage refers to the amount of debt the company has been using to finance its business operations
- When interest rates are rising, low debt protects the firm, especially when profitability is impacted by a recession
- D/E<1.5 is the constraint setting the maximum level debt allowed as % of shareholder equity (150%)
iShares MSCI USA Min Vol Factor ETF Invalid tag asset is the benchmark of this selection