One of the ways we measure the correctness of our research is through what we call "Hits and Misses." Here is a look at our recent batting average:
| Year: |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
| Hits |
441 |
425 |
351 |
355 |
365 |
372 |
370 |
| Misses |
15 |
16 |
13 |
14 |
16 |
17 |
18 |
| Percentage |
97% |
96% |
96% |
96% |
96% |
97% |
95% |
What do these figures mean?
With an average lead time of over 5 months, Egan-Jones uses quantitative and qualitative risk rating tools to anticipate changes in credit quality. As a result, EJR's analysts are able to discern when a situation has significantly or not-so-significantly changed within a very narrow margin of error; historically, as low as 3 to 5 percent.
While it is widely held that the market typically leads the major agencies' rating changes, determining precisely which price fluctuation is an anomaly or a false signal and which is a true indication of trouble perhaps a full year away is another problem entirely.
Makes no difference if you are a debt or equity manager, our Hit to Miss ratio of correctly identifying approximately 96% of rating differences subsequently confirmed by major agency action can significantly improve your decision making and absolute returns. Because: Changes in credit precede changes in common.