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Using the Refinitiv StarMine Combined Credit Risk Model in Equity Selection

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Exploring the benefits of a Combined Credit Risk model in Equity Selection

This research paper explores how the StarMine Combined Credit Risk (CCR) model can add value to equity portfolios. This analysis focuses on the interaction between the StarMine Combined Credit Risk (CCR) and StarMine Value-Momentum (ValMo) models, to exemplify that a combined CCR-ValMo interaction can be used to identify the existence of momentum and mean reversion effects in ValMo portfolios.

Download the report to find out:

  • How the CCR-ValMo interaction can help identify the existence of momentum and mean reversion effects in ValMo portfolios.
  • How combining CCR with ValMo in a multi-factor model can provide diversification and risk-reduction benefits.
  • How the CCR model can be used to complement a fundamental or quantitative equity selection strategy.

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Inclusion of the momentum and the mean reversion effects through CCR-ValMo interaction terms in a factor-based stock selection model can quantitatively help in forecasting returns.

Tarun Sanghi, PhD, CFA
StarMine Research Team

Key content

Risk reduction

By combining CCR with ValMo in a multi-factor model can provide diversification and risk-reduction benefits.

Strong mean reversion

Among low credit risk securities, in the top and the bottom ValMo deciles over 12 months, measured across the largest 3000 securities by market capitalization in the US equities.

Enhanced momentum

Among high credit risk securities, in the top and bottom ValMo deciles over 1 month.