Returns to Styleusing Style Research’s

Markets Analyzer

China

End January 2011

International Experience

• Style Investing works• Value and Small Cap works long term• Best Value Markets – Japan and Korea• Most markets have small cap premium• High beta stocks do not generally perform well

Overview

• Value works long term– like in other markets– High Dividends best over 10 years

• Large cap works better than small cap– Unlike other markets

• Beta does not work– like other markets

• Nothing works consistently– Top 10 inconsistent over different time periods

Approach

• Benchmark = market– All stocks with market cap of USD 100

• Analysis after sector adjustment– Factor screen within sectors– Eliminates sector bias

• Includes dividends• Rebalanced every 6 months– Repriced every month

Value

Growth

Other

Quality

Returns to Style – last 10 yearsQuality and Value works!

SA, annualised

10 year XS returns

Weight: Market Cap, Rebal 6 mths

7.4% pa

Weight: Market Cap, Rebal 3 mths

8.3% pa

Weight: Earnings, Rebal 6 mths

12.2% pa

overview

• Value works long term– like in other markets– High Dividends best over 10 years

• Large cap works better than small cap– Unlike other markets

• Beta does not work– like other markets

• Nothing works consistently– Top 10 inconsistent over different time periods– Rebalance and weighting schemes make a difference