MICERs are Market Implied Consensus Expected Returns and are the result – in terms of risk premia – of a reverse optimization using some available market information about variances, covariances and capitalizations. Investors express their views about stocks by collectively holding the market portfolio, by doing so market capitalizations represent investors’ trading choices to hold securities according to their preferences in terms of expected risk and return. If investors seek to maximize their utility in holding portfolios and do hold their desired and optimal portfolio, then market information – embedded in stock prices – contains investors’ expected returns on individual securities.
The following is a tree map of risk premia on S&P 500 securities as of Feb 13, 2014 – market weights have been derived by iShares ETF S&P 500 index (IVV).
The first 40 securities are listed below (MICER is the risk premia implied in market consensus).
| # | Ticker | Weight | Volatil. | MICER | Sector |
|---|---|---|---|---|---|
| 1 | AAPL | 2.96 | 29.74 | 2.76 | Information Technology |
| 2 | XOM | 2.45 | 17.08 | 5.15 | Energy |
| 3 | GOOG | 2.05 | 26.60 | 8.48 | Information Technology |
| 4 | MSFT | 1.75 | 22.35 | 3.89 | Information Technology |
| 5 | JNJ | 1.60 | 18.23 | 6.37 | Health Care |
| 6 | GE | 1.58 | 20.24 | 7.57 | Industrials |
| 7 | WFC | 1.35 | 15.21 | 5.82 | Financials |
| 8 | JPM | 1.33 | 18.84 | 6.33 | Financials |
| 9 | CVX | 1.32 | 18.88 | 4.90 | Energy |
| 10 | PG | 1.29 | 14.99 | 2.80 | Consumer Staples |
| 11 | PFE | 1.26 | 20.87 | 5.83 | Health Care |
| 12 | BRK-B | 1.25 | 16.84 | 6.61 | Financials |
| 13 | IBM | 1.13 | 17.61 | 5.14 | Information Technology |
| 14 | BAC | 1.10 | 20.82 | 6.31 | Financials |
| 15 | T | 1.07 | 19.74 | 5.97 | Telecommunication Services |
| 16 | MRK | 0.99 | 18.60 | 4.96 | Health Care |
| 17 | C | 0.93 | 24.81 | 8.14 | Financials |
| 18 | KO | 0.90 | 15.73 | 4.48 | Consumer Staples |
| 19 | CMCSA | 0.88 | 25.76 | 5.70 | Consumer Discretionary |
| 20 | VZ | 0.83 | 15.91 | 3.04 | Telecommunication Services |
| 21 | ORCL | 0.82 | 21.53 | 7.71 | Information Technology |
| 22 | AMZN | 0.80 | 45.72 | 11.90 | Consumer Discretionary |
| 23 | QCOM | 0.79 | 18.30 | 4.96 | Information Technology |
| 24 | DIS | 0.78 | 28.47 | 9.54 | Consumer Discretionary |
| 25 | GILD | 0.77 | 35.18 | 7.87 | Health Care |
| 26 | PM | 0.77 | 23.22 | 7.61 | Consumer Staples |
| 27 | PEP | 0.77 | 16.91 | 4.03 | Consumer Staples |
| 28 | CSCO | 0.75 | 19.61 | 4.21 | Information Technology |
| 29 | INTC | 0.75 | 18.84 | 5.87 | Information Technology |
| 30 | WMT | 0.75 | 13.40 | 4.55 | Consumer Staples |
| 31 | SLB | 0.73 | 19.46 | 6.73 | Energy |
| 32 | V | 0.70 | 23.47 | 6.20 | Information Technology |
| 33 | HD | 0.67 | 13.41 | 4.12 | Consumer Discretionary |
| 34 | FB | 0.65 | 56.48 | 13.72 | Information Technology |
| 35 | UTX | 0.59 | 19.01 | 6.61 | Industrials |
| 36 | MCD | 0.58 | 12.31 | 3.68 | Consumer Discretionary |
| 37 | AMGN | 0.57 | 24.70 | 7.35 | Health Care |
| 38 | BA | 0.54 | 28.34 | 7.37 | Industrials |
| 39 | BMY | 0.53 | 29.77 | 9.31 | Health Care |
| 40 | MMM | 0.51 | 20.89 | 6.43 | Industrials |
Volatility MICER scatter plot below shows implied investor choices on individual securities.
Following is the density scatter plot after faceting for market sectors.
Below is the box and whisker plot of all consensus implied risk premia on S&P 500 securities as of Feb 13, 2014.
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