MICERs

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).

IVV-tm-2014-02-13

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.

MICERscat-2014-02-13

Following is the density scatter plot after faceting for market sectors.

MICERscat-facet-2014-02-13

Below is the box and whisker plot of all consensus implied risk premia on S&P 500 securities as of Feb 13, 2014.

2013-02-13

Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *

*

+ 63 = 67

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Tweets