Portfolio Characteristics | Analysis of Style

Portfolio Characteristics

Portfolio Characteristics Analysis of Style

In Russell Style Classification (RSC), a sequential method of analyzing investment style developed and used by the Frank Russell Company's Manager Research Group. This method, also known as the Style Classification System (SCS), conditionally evaluates manager portfolio characteristics using non-linear probability of style membership functions to build a style assessment. The logic behind this system is explained by Chistopherson and Trittin (1995). The interest in portfolio characteristics flows from the expectation that portfolios with certain key equity characteristics will tend to earn a certain pattern of returns in the marketplace.

The equity characteristics analyzed are:

Price/Book

Dividend Yield

Price/Earnings

Return on Equity (5 Year)

Sector Deviation

Percent of Capitalization in the small cap segment

The characteristics are analyzed sequentially, or more precisely, conditionally, so that the assessment earlier in the chain of logic is refined using subsequent information. In this sense RSC's portfolio characteristics analysis of style is an artificial intelligence system.

For over 1,000 additional terms and definitions please see our Investment Glossary Guide.

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