Lazard Asset Management Factor Report OCT Factor Returns¹ (%)

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1 Lazard Asset Management Factor Report OCT 8 Global equity market indices inched higher in September. Japan and the United Kingdom, two of the weakest markets in 8, along with the energy-dominated Norwegian exchange, led the developed markets higher during the month. The United States mustered together another positive month overcoming an additional interest rate hike by the Federal Reserve, to enjoy its best quarter since the fourth quarter of 3. Despite ongoing monetary stimulus, European markets continue to lag as trade and political concerns continue to color investor opinion. Brexit and Italy remain primary focal points for investors, overshadowing a pick-up in German consumer confidence and wage growth. Oil prices marched steadily higher in the quarter reaching their highest level since the 5 crash. The OPEC decision to maintain production at current levels coupled with impending Iranian sanctions caused a % increase in prices in the quarter. Emerging markets lost ground again in September and are down over 7.5% for the year. China remains at the forefront of investor concerns as its debt load, US tariffs, and the yuan devaluation have placed pressure on the market. The increase in oil prices benefited many of the energy-dominated exchanges including Russia and Brazil which led emerging markets performance in September. Turkey remained highly volatile, rallying over % in the month as the central bank defied President Recep Tayyip Erdogan by raising interest rates 65 basis points in order to combat rampant inflation. Along with China, India also sold off in the face of two interest rate hikes as the rupee continued to slide. From a sector perspective, energy stocks, with the increase in oil prices, led the markets in September followed by telecom stocks which rebounded but remain the weakest sector over the past year. Rising interest rates and a flattening yield curve adversely impacted real estate and financial stocks, the weakest sectors in September. The information technology sector, which includes some of the stellar performers in 8, gave back some ground but remains the strongest sector over the past year. Factor performance showed divergence across regions for the month. Value measures were strong in emerging and European markets, but lagged in the United States. Sentiment measures also worked in Europe and Japan, but not in the United States. and quality measures were broadly out of favor. Large cap stocks were favored globally particularly in emerging markets and the United States. Higher risk stocks were broadly out of favor. Factor Returns¹ (%) 3 Months Year Value Months Year Hist EPS Proj EPS Hist Sales Hist EPS Proj EPS Hist Sales Global Developed United States Europe Japan Emerging Markets As of 3 September 8 Source: Lazard, I/B/E/S, Standard & Poor s, WorldScope RD65

2 3 Months Year Sentiment - Price Momentum 3 Mo. Analyst Price Momentum 3 Mo. Analyst - 3 Months Year Quality Operating Margin Operating Margin 3 Months Year Risk Beta Volatility Size Beta Volatility Size Global Developed United States Europe Japan Emerging Markets Global Market Returns (%)² Month 3 Months Year 5 Years Global Large Cap Small Cap Emerging Markets United States As of 3 September 8 Source: Lazard, I/B/E/S, Standard & Poor s, WorldScope

3 3 Global Developed Factor Returns (%)¹ Month 3 Months Year 5 Years Value P/B P/E (trailing) Yield Hist EPS Proj. EPS Hist Sales Sentiment Price Momentum Mo. Analyst Up/down Quality Operating Margin Risk Beta Volatility Size US Factor Returns (%)¹ Month 3 Months Year 5 Years Value P/B P/E (trailing) Yield Hist EPS Proj. EPS Hist Sales Sentiment Price Momentum Mo. Analyst Up/down Quality Operating Margin Risk Beta Volatility Size Europe Markets Factor Returns (%)¹ Month 3 Months Year 5 Years Value P/B P/E (trailing) Yield Hist EPS Proj. EPS Hist Sales Sentiment Price Momentum Mo. Analyst Up/down Quality Operating Margin Risk Beta Volatility Size As of 3 September 8 Source: Lazard, I/B/E/S, Standard & Poor s, WorldScope

4 Japan Factor Returns (%)¹ Month 3 Months Year 5 Years Value P/B P/E (trailing) Yield Hist EPS Proj. EPS Hist Sales Sentiment Price Momentum Mo. Analyst Up/down Quality Operating Margin Risk Beta Volatility Size Emerging Markets Factor Returns (%)¹ Month 3 Months Year 5 Years Value P/B P/E (trailing) Yield Hist EPS Proj. EPS Hist Sales Sentiment Price Momentum Mo. Analyst Up/down Quality Operating Margin Risk Beta Volatility Size As of 3 September 8 Source: Lazard, I/B/E/S, Standard & Poor s, WorldScope

5 5 Month Moving Averages¹ Value (%) Oct 3 Sep Oct Sep 5 Oct 5 Sep 6 Oct 6 Sep 7 Oct 7 Sep 8 Global Developed - - United States - Europe - - Japan - Emerging Markets -

6 6 Month Moving Averages¹ (%) Oct 3 Sep Oct Sep 5 Oct 5 Sep 6 Oct 6 Sep 7 Oct 7 Sep 8 Global Developed - - United States Hist EPS Hist Sales Proj EPS - - Hist EPS Hist Sales Proj EPS Europe - Hist EPS Hist Sales Proj EPS Japan - - Hist EPS Hist Sales Proj EPS Emerging Markets - - Hist EPS Hist Sales Proj EPS

7 7 Month Moving Averages¹ Sentiment (%) Oct 3 Sep Oct Sep 5 Oct 5 Sep 6 Oct 6 Sep 7 Oct 7 Sep 8 Global Developed - United States 3 Mo. Analyst Price Momentum Mo. Analyst Price Momentum Europe 3-3 Mo. Analyst Price Momentum Japan Mo. Analyst Price Momentum Emerging Markets - 3 Mo. Analyst Price Momentum

8 8 Month Moving Averages¹ Quality (%) Oct 3 Sep Oct Sep 5 Oct 5 Sep 6 Oct 6 Sep 7 Oct 7 Sep 8 Global Developed - - United States Operating Margin - - Operating Margin Europe - - Japan Operating Margin - - Operating Margin Emerging Markets - - Operating Margin

9 9 Month Moving Averages¹ Risk (%) Oct 3 Sep Oct Sep 5 Oct 5 Sep 6 Oct 6 Sep 7 Oct 7 Sep 8 Global Developed - - United States Beta Volatility Size - - Beta Volatility Size Europe - - Beta Volatility Size Japan - Beta Volatility Size Emerging Markets - - Beta Volatility Size

10 Lazard Asset Management Notes Factor performance is based on a universe of developed market and emerging market stocks with a market capitalization of $M or greater (approximately 6, companies). Global factor returns reflect the return differential, computed monthly, for an equal weighted composite of stocks ranked in the top and bottom % (quintile) for each measure shown. For example, each month the aggregate return for stocks ranking in the bottom % in terms of operating margins is subtracted from the aggregate return for stocks ranking in the top %. The difference is the return displayed. The monthly differences are averaged for longer time periods. The calculation for P/B, P/E and leverage reflect the performance difference between the lowest quintile less the highest quintile. For all other measures, the difference reflects the difference between the highest quintile less the lowest quintile. P/B is calculated as current market price divided by book value. P/E is calculated as current market price divided year trailing earnings. Yield is calculated as most recent dividend by current market price. Historic EPS is calculated as a 5 year trailing earnings per share growth. Projected EPS growth is calculated as I/B/E/S analyst forecasted 3 5 year growth in earnings per share. Historic Sales is calculated on a 5 year trailing growth in sales revenue. Price momentum is calculated as the month change in USD price. 3 MO Analyst Up/Down is calculated as the change in the average EPS estimate over the past three months. Operating margin is calculated as net operating income divided by total revenue. is calculated as the net income divided by shareholder s equity. is calculated as outstanding debt divided by shareholder s equity. Beta is calculated against local market indices for periods up to 36 months. Volatility is calculated on a trailing 7 day average of USD based price returns. Size is market capitalization as calculated according to MSCI. Market return data is as of 3 September 8 and is based on the following indices: Global S&P Global BMI; Large Cap S&P Global LargeMidCap; Small Cap S&P Global SmallCap; Emerging Markets S&P Emerging BMI; US S&P 5. Important Information Published on October 8. This document reflects the views of Lazard Asset Management LLC or its affiliates ( Lazard ) based upon information believed to be reliable as of the publication date. There is no guarantee that any forecast or opinion will be realized. This document is provided by Lazard Asset Management LLC or its affiliates ( Lazard ) for informational purposes only. Nothing herein constitutes investment advice or a recommendation relating to any security, commodity, derivative, investment management service or investment product. Investments in securities, derivatives, and commodities involve risk, will fluctuate in price, and may result in losses. Certain assets held in Lazard s investment portfolios, in particular alternative investment portfolios, can involve high degrees of risk and volatility when compared to other assets. Similarly, certain assets held in Lazard s investment portfolios may trade in less liquid or efficient markets, which can affect investment performance. Past performance does not guarantee future results. The views expressed herein are subject to change, and may differ from the views of other Lazard investment professionals. This document is intended only for persons residing in jurisdictions where its distribution or availability is consistent with local laws and Lazard s local regulatory authorizations. Please visit for the specific Lazard entities that have issued this document and the scope of their authorized activities. Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one s home market. The values of these securities may be affected by changes in currency rates, application of a country s specific tax laws, changes in government administration, and economic and monetary policy. Small- and mid-capitalization stocks may be subject to higher degrees of risk, their earnings may be less predictable, their prices more volatile, and their liquidity less than that of large-capitalization or more established companies securities. Emerging market securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging market countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in emerging market countries. Certain information included herein is derived by Lazard in part from an MSCI index or indices (the Index Data ). However, MSCI has not reviewed this product or report, and does not endorse or express any opinion regarding this product or report or any analysis or other information contained herein or the author or source of any such information or analysis. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any Index Data or data derived therefrom. The MSCI Index Data may not be further redistributed or used as a basis for other indices or any securities or financial products. A quantitative investment strategy relies on quantitative models and quantitative filters, which, if incorrect, may adversely affect performance.