Product Launch | Quantitative Equity Model (QEM)

Jay Owen SRI/ESG News

GMI Ratings

Press Release

GMI Ratings’ Quantitative Equity Model (QEM) Uses Forensic Measures of Issuer Risk to Predict Equity Returns Globally, Across Industries, Large-cap and Small-cap Portfolios

New York (June 12, 2013) – GMI Ratings announced today the formal launch of the Quantitative Equity Model (QEM), which uses governance and accounting-related forensic risk metrics to predict equity returns. In connection with this launch, GMI Ratings published today detailed reports on the predictive value and other performance characteristics of QEM for North American, Western European and Asia Pacific portfolios. Starting today, QEM data feeds will be available to pre-qualified institutional investors and asset owners.


Dan Concannon, Chief Executive Officer of GMI Ratings, said: “Over the past few weeks, we saw another series of reports confirming that businesses often resort to aggressive and illegal accounting and disclosure practices to meet increasingly ambitious growth targets. The growing body of research on the incidence and economic costs of faulty accounting practices strongly suggests that institutional investors should integrate forensic analysis more fully into routine decisions about portfolio management and benchmarking, stock selection and rejection.”


Mr. Concannon added: “The white papers we published today provide a detailed analysis of QEM’s out-of-sample performance characteristics. We found that QEM scores effectively predict equity returns globally, across industries, large-cap and small-cap portfolios. In many areas, QEM not only improves returns, but also lowers portfolio volatility.”


Mr. Concannon concluded: “QEM is now available via data feeds to qualified institutional investors and asset owners. We welcome inquiries and back-test requests.”

About GMI Ratings 

GMI Ratings is an independent provider of research and ratings on environmental, social, governance (ESG) and accounting-related risks affecting the performance of public companies. A signatory to the Principles for Responsible Investment (PRI), GMI Ratings was formed in 2010 through the merger of GovernanceMetrics International, The Corporate Library and Audit Integrity. In the 2012 Independent Research in Responsible Investment (IRRI) Survey conducted by Thomson Reuters Extel and, GMI Ratings was named “The Best Independent Corporate Governance Research Provider”. Clients of GMI Ratings include leading institutional investors, banks, insurers, auditors, regulators and corporations seeking to incorporate accounting and ESG factors into risk assessment and decision-making. Visit the GMI Ratings website  

GMI Ratings’ Core Risk Models

  • ESG ratings for more than 6,000 companies worldwide incorporate 150 ESG KeyMetrics® to help investors assess the sustainable investment value of corporations.
  • Accounting and Governance Ratings (AGR®) for approximately 19,000 public companies worldwide gauge the accuracy and reliability of corporate financial reports.
  • Launched in May 2013, the Quantitative Equity Model (QEM) uses governance and accounting-related forensic risk metrics to predict equity returns.

Specialized Applications

  • The Litigation Risk Model identifies companies with an elevated risk of securities class action litigation. The model combines the AGR Score with commonly recognized litigation risk factors. The majority of companies facing Federal class action lawsuits are consistently ranked in the lowest 20% of the risk ratings distribution a year before the lawsuit was filed.
  • The Financial Distress Risk Model predicts bankruptcies and identifies companies in severe financial distress. The model combines accounting ratios, AGR scores and Merton Distance-to-Default components.


Joe Kern
Email: [email protected]
Phone: +1 212 949 1313 ext. 335


Joshua Kendall
Email: [email protected]
Phone: +44 (0)207 160 9861


Joyce Brown

Email: [email protected]

Phone: +1 207 553 5679