Investment managers are increasingly evaluating stocks through a global lens, as markets become more interconnected and supply chains and trading partners are more closely linked. How can the evolving nature of financial markets and their extensive linkages create a broader and exciting new opportunity set for quantitative investors? This new research brief includes discussion of three key strategies that PGIM Quantitative Solutions' Quantitative Equity team uses to generate alpha:

• Exploit linkages and information asymmetry: investment managers who can identify and understand the linkages and information diffusion dynamics for companies in a given industry can reap more alpha opportunities. Company price dynamics can by impacted by a direct shock, but also due to an indirect ripple effect. An appealing aspect of exploiting indirect information is that even without direct information about a company, such as analyst coverage and conference calls, various linkages lead to indirect information that can yield insights about future performance prospects.
• Employ information diffusion effects: Information typically diffuses from developed to emerging markets and from large-cap to smaller-cap stocks. Evaluating leaders and laggards through an information diffusion lens can lead to positive performance effects. Here's a recent example: returns are strongest in Emerging Markets stocks relative to US equities, and in small-cap relative to large-cap stocks.