Model Testing & Findings
Several internal studies have been completed to quantify the returns generated by our analytical model. Our model is regularly tested to determine the benefit to our customer base.
A comprehensive study was conducted to analyze and rate the Dow Jones Industrial Average components for the year ending 2002, utilizing our corporate rating system. The purpose of the analysis was to compare stock market returns for companies within the three rating tiers to each other and to the returns of the S&P 500 over the following six years. Twenty-nine of the thirty Dow companies were evaluated (one was excluded due to its change in corporate structure during 2002).
The analysis resulted in four companies within Tier T1 (T1 or T1-), eighteen companies within Tier T2 (T2+, T2, or T2-), and seven companies within Tier T3. Average annual stock returns, excluding dividends, for each company in the study were adjusted for stock splits.
In October 2009, the third quarter of 2009 was evaluated to assess the short-term returns of our corporate rating system. The companies rated within the "T1" Tier had excess returns over the S&P 500 returns of 9.51 percentage points. The "T1" Tier exceeded the "T3" Tier group by 6.86 percentage points for the same period.
A comprehensive study was conducted to analyze and rate the Dow Jones Industrial Average components for the year ending 2002, utilizing our corporate rating system. The purpose of the analysis was to compare stock market returns for companies within the three rating tiers to each other and to the returns of the S&P 500 over the following six years. Twenty-nine of the thirty Dow companies were evaluated (one was excluded due to its change in corporate structure during 2002).
The analysis resulted in four companies within Tier T1 (T1 or T1-), eighteen companies within Tier T2 (T2+, T2, or T2-), and seven companies within Tier T3. Average annual stock returns, excluding dividends, for each company in the study were adjusted for stock splits.
Total Average Annual Returns
| TiartaTM Rating | One Year | Three Years | Five Years | Six Years |
|---|---|---|---|---|
| T1 | 43.68% | 30.68% | 35.30% | 26.33% |
| T2 | 38.53% | 16.45% | 13.55% | -.87% |
| T3 | 35.93% | 14.98% | 15.23% | .87% |
| S&P 500 | 26.38% | 13.96% | 13.37% | .44% |
| T1 Excess Returns* | 17.30% | 16.72% | 21.93% | 25.89% |
In October 2009, the third quarter of 2009 was evaluated to assess the short-term returns of our corporate rating system. The companies rated within the "T1" Tier had excess returns over the S&P 500 returns of 9.51 percentage points. The "T1" Tier exceeded the "T3" Tier group by 6.86 percentage points for the same period.
*Excess returns are defined as the difference between T1 stock market returns and S&P 500 returns for that same period.
**Past performance of our corporate rating system is not necessarily indicative of future results. Though our testing has shown positive, excessive returns, we do not purport that utilizing our ratings will provide statistically significant, positive, abnormal returns.
