Bart van der Grient explains how Robeco ensures good data quality, which is vital for selecting stocks and conducting empirical research. “Our approach makes the stock selection and portfolio construction process more transparent,” he says.
Bart van der Grient is the equity researcher who is responsible for data quality at Robeco Quantitative Research. He uses and develops tools to generate new stock rankings and to optimize the portfolios. Another important element of his work is the creation of historic databases for empirical research.
"For us it is very important to stay in control. We sometimes use external tools, but for the majority of our work we develop our own. This in-house approach makes the stock selection and portfolio construction process more transparent. If the stock selection model indicates a particular trade in the portfolio, we know why. For example, it could be because of a stock’s valuation, or because it helps to decrease risk. We can also look more closely at the underlying variables if the trade is unexpected. There are external platforms that can do many things at the same time, but we prefer to start with the raw data and build in periodical checks using several applications."
'For us it is very important to stay in control'
"We have created many of these checks. For example, we analyze stocks that have moved significantly in our ranking. These changes can be legitimate, for example, as a result of good corporate earnings. But if a change results from an incorrectly handled stock split, we adjust for this event."
"A second thing that makes Robeco different is our experience, especially in emerging markets. We do not just have experience in our Quantitative Equity and Quantitative Research departments, but also in the fundamental emerging markets equities team. Close cooperation increases the quality of data, because in emerging markets equities there are many exceptions. For example, sometimes not all of a company’s net earnings go to its shareholders, because the government also receives a share of these earnings. We can check such cases with the fundamental team, because they have more in depth knowledge of individual companies. These discussions also help to choose the best data providers. We have preferred data suppliers, but if for a particular stock or group of stocks another data provider is better, we use this one instead."
"We also cooperate closely with the fundamental team in choosing the best share class to trade in. You want to trade in the class where trading costs are lowest. This instrument does not necessarily have the best quality data linked to it. Therefore we developed tools to combine data from different sources and listings. For example, we can trade in the liquid ADRs (American Depositary Receipt) of a particular firm, while we select stocks based on the data of a domestic share class."
"We use a bottom-up approach to build our database and always check the accuracy of the data. For example, by reconstructing the MSCI World Index with individual stocks and comparing it with the data of the index provider, we can validate return data. Such checks are done for all variables in our database."
"We especially want to make sure that we have data on all stocks, including those that no longer exist – in order to prevent survivorship bias. Even academic papers do not always take survivorship bias into account. It is important to include the data of firms that no longer exist, for example, because the conclusions about the performance of high risk stocks may otherwise be overly optimistic. For every successful high tech company such as Apple, many others have fallen by the wayside."
"One of the most challenging projects we worked on was gathering good data on frontier markets. Take for example, Pakistan, or countries in the Middle East and Africa. We have invested considerable time in building a high-quality database, which hasn’t been easy; there are practical problems such as different trading days. For example, in countries where there is Sunday trading – does it count as the beginning of one week or the end of another? We have frequent contact with data providers on these matters and sometimes they change their dataset as a result of our findings."
"In addition to the fact that we are fully prepared to include new countries in our universe, this database has allowed us to test our models on such frontier markets, which has provided additional evidence for the strength of our strategies."
‘In emerging markets equities there are many exceptions’
"Cooperation is very good. Whenever trades are proposed there is contact. There is a division of responsibilities – we are responsible for the data, run the models and conduct the research aimed at further improving the models."
"The portfolio managers of Quantitative Equity implement the model outcomes in the portfolios after checking the stocks rankings to apply the four-eye principle and monitor positions as well as risk exposures. We can comment on a particular trade and they can come to us with questions; so there is a feedback loop. It helps that many of the portfolio managers also have a background in quantitative research. Together we make sure to work with the highest quality data."
The content displayed on this website is exclusively directed at qualified investors, as defined in the swiss collective investment schemes act of 23 june 2006 ("cisa") and its implementing ordinance, or at “independent asset managers” which meet additional requirements as set out below. Qualified investors are in particular regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes and central banks, regulated insurance companies, public entities and retirement benefits institutions with professional treasury or companies with professional treasury.
The contents, however, are not intended for non-qualified investors. By clicking "I agree" below, you confirm and acknowledge that you act in your capacity as qualified investor pursuant to CISA or as an “independent asset manager” who meets the additional requirements set out hereafter. In the event that you are an "independent asset manager" who meets all the requirements set out in Art. 3 para. 2 let. c) CISA in conjunction with Art. 3 CISO, by clicking "I Agree" below you confirm that you will use the content of this website only for those of your clients which are qualified investors pursuant to CISA.
Representative in Switzerland of the foreign funds registered with the Swiss Financial Market Supervisory Authority ("FINMA") for distribution in or from Switzerland to non-qualified investors is ACOLIN Fund Services AG, Affolternstrasse 56, 8050 Zürich, and the paying agent is UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zürich. Please consult www.finma.ch for a list of FINMA registered funds.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco/RobecoSAM AG product should only be made after reading the related legal documents such as management regulations, articles of association, prospectuses, key investor information documents and annual and semi-annual reports, which can be all be obtained free of charge at this website, at the registered seat of the representative in Switzerland, as well as at the Robeco/RobecoSAM AG offices in each country where Robeco has a presence. In respect of the funds distributed in Switzerland, the place of performance and jurisdiction is the registered office of the representative in Switzerland.
This website is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, the publication or availability of this website is prohibited. Persons in respect of whom such prohibitions apply must not access this website.