ABOUT AQ
Analysis
Who we analyse
We analyse providers of professional investment research.
The data comes directly from the providers of the investment research.
We welcome additional providers, for more detail please email
What we analyse
Our analysis is quantitative, based on measurable outputs of investment research.
We have two principal metrics:
How we analyse
Our independence makes us impartial. We analyse figures and recommendations in an objective manner.
AQ
The new AQ methodology for determining the accuracy of earnings estimates was launched at the beginning of 2007, following consultations with the industry. The significant change is that it looks at the “error” of the analyst, as expressed by the shaded area on the eps chart below to identify the best forecasting analysts.
The default values are used in the publications. When used in AQ Online, the customer can set their own values not only for the annual weightings but also for any estimate, e.g. to highlight analysts who have better early forecasting accuracy during any particular period.
AQ scores are in the range 0-100. They can be interpreted as follows:
>60: Small deviations in actual eps vs. the spread of forecasts (generally below 5%) for the past 2 years
40-60: Forecasts falling into this range indicate either deviations of actual eps vs. forecasts up to 10% over past 2 years
20-40: Deviations of actual vs. forecast eps typically between 10% and 15%, possibly for one of past 2 years. Analysts who have initiated within past 2 years can also have low scores
<20: AQ's are often not registered where deviations from actual eps numbers exceed 15%. Note that individual analyst track records have only been building up since the start of the year
RQ
The methodology adopted in RQ has been developed after consultation with the industry. It is very different to our AQ report. The analysis scores research houses differently, depending on whether they have absolute or relative recommendations. Each recommendation made during this period has been assessed over its 'lifetime' (i.e. until it is changed). Current recommendations are therefore 'open' until they are changed.
Analysts are scored on the basis of the percentage share price movement (up or down) during the lifetime of a particular recommendation. Those with absolute recommendations are measured on the basis of the percentage change in the share price during the lifetime of the recommendation. The analysis is over the trailing twelve months.
Those with relative recommendations are measured on the price movement relative to the price of the relevant index. This is a country index (e.g. IBEX 35 or FTSE All Share) for those houses which make recommendations on a local index basis. Or it is a sector index (the market sectors within the Dow Jones 600) for those which make sector relative recommendations.
Scores are calculated as follows:
Strong Buy recommendation receives the percentage share price movement times 1.25
Buy recommendation receives the percentage share price movement times 1
Hold has no score
Reduce recommendation receives the percentage share price movement times -1
Sell recommendation receives the percentage share price movement times -1.25
There is no theoretical limit - positive or negative - to the score which an analyst could achieve. Where share prices have risen by 100%, an analyst with a strong buy throughout the period could score 125 (or conversely -125 if the analyst had a strong sell on this stock). When markets and sector indices are trending upwards, this favours absolute analysts and when they are trending lower, relative analysts tend to do better.
