Quintile Performance Analysis In Plain English

We do a lot of research and writing about how various factors such as valuation, inflation, economic growth, and earnings quality relate to investment returns. One of the tools we use to do this is “quintiles.” Quintile analysis is a particular form of bucketing, which simply means to divide your data into various “buckets” from highest to lowest. So, imagine that you take the data for 3,000 companies (which, by the way, is roughly the size of the universe that Vident begins with when constructing its domestic equity index, the Vident Core U.S. Stock IndexTM). Each company has a Gross Margin at a given point in time, Gross Margin is one way of measuring profits. Then you take the 3,000 companies and divide them into 1/5ths. The first bucket is filled with the 600 companies (600 is 1/5th of 3,000) with the highest Gross Margin, the second bucket is filled with the 600 companies with the second highest Gross Margin, and so on. Read Full Article »