The Investing Times carries performance data on a number of research metrics it produces throughout its reports. See below for a summary of the key data validation metrics:

Science of Investing Scorecard (Asset Allocation Research)

The focus of this report is to provide real-time updates on some of the most reliable asset allocation metrics both in isolation and as a combination. These have each been rigorously analysed and tested to have historically provided an opportunity for enhanced risk-adjusted returns. Many of them are famous, including analysis of the Shiller P/E ratio and the Coppock Indicator, but some of them are far less well-known.

The net result is a scorecard that has a strong correlation to forward 3, 5 and 10 year returns. See below for the long-term performance record of the scorecard and the strong correlation between the aggregate score and future returns:

The Zone System (Asset Allocation Research)

The Zone System is a 20 year old tool that share-market investors can reliably use to make judgements on the future direction of share prices. It uses five zoning formulas that identify when the share-market is significantly undervalued, undervalued, fair value, overvalued and significantly overvalued.

The Zone System first came to prominence when it accurately picked the 1987 crash, and this was later monitored with the accurate identification of the 2001 tech wreck and the 2007 GFC peaks. Equally, it also identified the early 1990’s, 2003, 2009 and 2012 as periods of significant undervaluations (which also proved accurate).

The publication of the Zone System has typically been limited to the exclusive reporting in The Investing Times. The Investing Times was established by Australia’s former number 1 financial adviser, Austin Donnelly, who was also the original advocate and creator of the Zone System.

ZONE SYSTEM EXPLAINED – WHITEPAPER (PDF opens in a new tab)

The application of the Zone System takes many forms, with some readers of the Investing Times using it as a tool to strictly set their asset allocation, whilst others use it as a guide along with other tools such as the Robert Shiller PE ratio and the Benjamin Graham Yield Gap. In every edition, the Investing Times runs the Zone System on more than 10 global markets to provide a broad view of equity valuations and the potential pockets of value within it. 

The performance of the Zone System has proven to be stellar and significantly higher than market averages. By way of explanation, 112 years of analysis proved that a “significantly undervalued” indicator leads to >2x the market average return and >3x the “significantly overvalued” indicator returns. It also has between 11%-29% less risk of a negative return (refer to page 3 of the whitepaper for details). Said another way, the significantly undervalued zone generates returns that average in excess of 15% whereas the significantly overvalued averages only 4% return with considerably higher risk.

Recession Tracker (Economic Research)

Within the Investing Times, 10 economic factors are outlined that are closely aligned with precipitating a recession. Using the aggregate of these indicators in similar vogue to the scoring system for the Science of Investing, it is possible to attribute the approximate prospect of a recession based on the number of indicators that are positive versus negative. What is evident is that an aggregate score of less than five (0 to 4) has very little chance of negative growth at only a 0.8% chance, whilst a score of five or more (5 to 10) has a 63.6% chance.

To say this simply, the publication tracks 10 of the strongest links to a recession, then consolidate the links into a number between 0 and 10; where 0 represents no chance of a recession and 10 represents a very high chance of a recession.

There is comprehensive data on all 10 indicators since 1979, and the link between the indicators and future economic growth is very strong (correlation is 0.59 in real time, 0.61 with a 3-month lead time and 0.49 with a 6-month lead time). This gives analytical confidence that the 10 indicators are valid measures of recession-risk in the future.

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