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In this short paper, we provide thoughts and ideas on how to
glean signals from national sector PMI data with a view to
utilising these in active equity investment strategies.
Our ideas are rooted in an approach that utilises PMI data in
terms of both the momentum and the relative performance of a
sector. This is achieved through a combination of transformations
and extensive use of PMI sub-index data.
To illustrate, we apply these ideas to a subset of our German
national sector PMI data, following a simple strategy where funds
are invested primarily in those sectors with the 'best' momentum.
Our results are encouraging and, depending on the combination of
sub-index data and weighting schemes deployed, signals from the PMI
data are shown to provide a platform for generating excess returns
compared to a naïve benchmark strategy.
To view the full paper, please click the link below.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
