MICERs chase volatility instead of cheese

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MICERs are on the prowl again. And by following them an investor, with a good aim and on her or his lucky day, might even find out some interesting information about undervalued (overvalued) stocks to add (subtract) to his portfolio and reap a refreshing excess return. An update on S&P 500 implied returns (MICERs) after a hard week (for your ‘favorite’ market correspondent) doesn’t show any particular change in market expectations though one can notice – in the charts below – some minor variations across sectors (compare with previous story about MICERs).

# Ticker Weight Volatil. MICER Sector
1 AAPL 2.83 17.44 1.46 Information Technology
2 XOM 2.46 16.60 3.47 Energy
3 GOOG 2.00 18.22 4.58 Information Technology
4 MSFT 1.82 22.60 4.36 Information Technology
5 JNJ 1.58 14.40 2.89 Health Care
6 GE 1.52 16.77 4.55 Industrials
7 WFC 1.40 16.51 4.13 Financials
8 JPM 1.34 20.15 4.58 Financials
9 BRK-B 1.33 15.58 3.49 Financials
10 CVX 1.32 13.93 2.91 Energy
11 PG 1.27 12.82 1.86 Consumer Staples
12 PFE 1.23 17.94 4.11 Health Care
13 VZ 1.16 17.64 2.78 Telecommunication Services
14 IBM 1.14 15.62 3.98 Information Technology
15 BAC 1.14 24.35 4.80 Financials
16 T 1.07 18.50 3.09 Telecommunication Services
17 MRK 0.97 14.64 3.16 Health Care
18 C 0.91 22.90 5.31 Financials
19 KO 0.87 12.96 2.35 Consumer Staples
20 AMZN 0.81 26.37 3.97 Consumer Discretionary
21 ORCL 0.80 20.58 4.97 Information Technology
22 DIS 0.79 21.10 5.69 Consumer Discretionary
23 QCOM 0.79 20.13 5.11 Information Technology
24 CMCSA 0.78 18.66 3.09 Consumer Discretionary
25 PM 0.77 15.19 3.09 Consumer Staples
26 INTC 0.75 13.75 2.90 Information Technology
27 PEP 0.75 14.54 2.55 Consumer Staples
28 WMT 0.73 13.12 2.36 Consumer Staples
29 SLB 0.71 17.15 3.71 Energy
30 CSCO 0.69 13.98 2.93 Information Technology
31 GILD 0.69 34.64 5.31 Health Care
32 V 0.67 18.52 3.88 Information Technology
33 HD 0.67 15.29 2.46 Consumer Discretionary
34 FB 0.66 37.06 6.06 Information Technology
35 MCD 0.57 16.00 1.70 Consumer Discretionary
36 UTX 0.57 15.60 3.76 Industrials
37 AMGN 0.57 26.16 5.20 Health Care
38 BMY 0.53 27.52 5.38 Health Care
39 CVS 0.52 15.85 2.99 Consumer Staples
40 UNP 0.52 16.33 4.19 Industrials

MICERs have come down since the beginning of March (March 4, 2014), signalling stock market implies lower risk premia across the spectrum of stocks in the bellwether US index.MICERs density plot grid

MICERs scatter plot facet wrap

 

As opposed to conventional wisdom market participants like to ‘buy’ when expected returns (i.e. MICERs in the present case and for our current evaluation model) are low and ‘sell’ when they are high. Hopefully, when rational behavior is to offset emotional reaction, one can expect MICERs to shed some light on well researched cognitive biases: as smart as can be next time I feel like following my gut feeling, I should tell myself to follow the MICERs instead.

Box-&-whisker plot of MICERs on S&P 500 index

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Posted in Economics, MICERs
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