Performance Overview Of Bernstein’s New Alpha Model

Bernstein Research analysts Vadim Zlotnikov, Ann Marie Larson and Charles Clavel provide insights into the “live” 12-month U.S. Bernstein Alpha Model and its year-to-date performance.

The 12-month U.S. Bernstein Alpha Model

The model has a modular structure and rests on four core components, based on the source of expected alpha:

• Stock selection
• Industry rotation
• Regime timing
• Factor timing

The stock selection component segregates between under- and out-performing stocks. The industry rotation component does the same, but for industries. The regime timing toggles between high or low volatility stocks, as well as high or low beta industries, depending upon the model’s inbuilt risk aversion signal. The factor-timing component acts as a filter for the stock selection component by switching off certain factors...