ABSTRACT
In the investment uses industry, valuation analysis has been used mostly by fundamental equity analysts, both the sell side and buy side, who follow individual companies, estimate their business growth, and calculate the fair value of company stocks. It might seem odd to some that quantitative equity managers would have any use for it. But one must remember that fundamental analysis does contain information, some of which has been used in quantitative models. For example, fundamental analysts issue near-term earning estimates and revisions estimate revision, which have found their way into quantitative factors. It has also been known that aggregate forward-earning forecast for the broad market such as the S&P
500 Index predicts market returns, but not necessarily the actual earnings. It is our view that valuation analysis using multiperiod long-term forecasts by fundamental analysts, when applied appropriately, can add value to quantitative investment processes.
