OPTICAL ACUMEN
At the Intersection of Data Visualization and Investment Research


Tuesday, January 19, 2016

Investment Performance Currents
This is the first of three "New Year's resolution" posts, where I play catch up with my other Morningstar Magazine articles in 2015.

Morningstar has long used its Market Barometer to provide an investment style-based performance overview. Based on the Equity Style Box, it uses a color scale to convey the investment return of the nine segments of the market. Yet how do you use this approach to convey performance for multiple time periods? I once built an animated version of the Barometer to see performance over time, but it wasn't useful, as it's difficult to remember the colors of segment as they change.

For the June/July 2015 issue of Morningstar Magazine, I worked (once again) with designer Zach Sherwood to create a display for multiple time periods, with "currents" that connected the best- and worst-performing areas of the market:

investment performance currents

This visualization is best seen at full size, wider than this narrow blog, so please click through to the magazine to see the full article. You can also download a PDF of the entire issue.

As noted in the article text, there was some persistence of outperformance from quarter to quarter. I was curious to see if there was any value to a quarterly style-momentum investment approach so I calculated the performance of a strategy based on always holding the single investment style segment that had performed best in the previous quarter. However, it returned just under 50%, which was slightly worse than holding the entire market for the entire period.



Throughout my career at Morningstar, the Chicago-based investment research firm, I've used creative language and visual elements to explain complex investment information and ideas. This is a personal site--all opinions expressed here are my own.

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