ROOF Scores
Market sentiment indicators
ROOF Scores (Risk-On/Risk-OFF) were created to quantify investors’ risk appetite, using investor behavior as a guide to whether market participants are risk-tolerant (bullish), neutral or risk-averse (bearish). Style factor (using Axioma's fundamental risk models) and sector performance are used as proxies for risk appetite, and we construct both style and sector ROOF scores. Additionally, both variants incorporate metrics on the recent change in overall market risk.
In addition, we leverage Axioma's risk models to construct ROOF Portfolios, which optimize against the benchmark using corresponding ROOF Scores as alphas.
The ROOF Scores use a bottom-up methodology allowing us to quantify the implied sentiment of the average investor in the market as well as the active sentiment of any portfolio against its benchmark.
*Last updated on November 4, 2024
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