Equity Valuation and Portfolio Management

CHAPTER 1

An Introduction to Quantitative Equity Investing

Paul Bukowski, CFA

Senior Vice President, Head of EquitiesHartford Investment Management

The goal of this chapter is to provide the reader a basic understanding of quantitative equity investing and to explain the quantitative investing process. We focus on the following three questions:

1. How do quantitative and fundamental equity investors differ?
2. What are the core steps in a quantitative equity investment process?
3. What are the basic building blocks used by quantitative equity investors?

In answering these questions, this chapter explores the quantitative equity investment process. We see how it is similar to many other approaches, all searching for the best stocks. Where it differs is in the creation of a repeatable process that uses several key criteria to find the most attractive companies—its stock selection model. Additionally, some of the most common techniques used by quantitative equity investors are covered.

It is important to understand that this chapter is dedicated to a traditional quantitative equity investing approach. There are many other types of investing that are quantitative in nature such as high-frequency trading, statistical arbitrage, and the like, however, these are not covered.