Frequently Asked Questions

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What is Cabot Behavioral Analysis?

Cabot Behavioral Analysis (CBA) is a proven analytic service for enhancing equity fund performance. CBA is the first and only service that assists managers in using Behavioral Finance to improve their investment decisions – particularly selling. Scientifically rigorous and mathematically robust, CBA helps you capture more from your current strategy, style and research.

How does Cabot Behavioral Analysis help me?

If managers can make smart, disciplined and effective investment decisions then it stands to reason that they may also make some decisions that don’t work. Cabot Behavioral Analysis enables managers to identify persistent patterns of ineffective sells and buys, and then implement shifts that avoid these performance problems. Most managers identify substantial opportunities to strengthen their selling; opportunities to improve buying are also uncovered.

What benefits can I expect from Cabot Behavioral Analysis?

Effective implementation of behavioral shifts results in managers realizing higher returns, improved peer rankings, increased net capital inflows and more profits. Opportunities to improve portfolio returns by 100 basis points or more annually are common.

How does Cabot Behavioral Analysis help me with selling?

If like most professional managers you invest the lion’s share of resources into buy decisions … quite likely then, you can capture more of the alpha generated in your buys from reexamining your sell discipline. No skill can be improved unless its performance can first be measured. Cabot Behavioral Analysis (CBA) provides a analytical understanding of how your selling adds to performance and shows you how to improve.

Can Cabot Behavioral Analysis help any portfolio?

In our experience Cabot Behavioral Analysis (CBA) can find opportunities for improvement in virtually every portfolio. CBA has helped managers representing a wide range of portfolio strategies, styles, quantitative support, and initial levels of performance. Managers, from the most fundamental to the most quantitative, make choices. And, it is in exercising their judgment expressed in these choices where unconsciously motivated behaviors can impact on decisions.

Is Cabot Behavioral Analysis difficult to implement?

Quite the contrary. In addition to assisting the manager in identifying and measuring persistent investment behaviors, Cabot Behavioral Analysis (CBA) provides complete implementation support. This support includes daily encouraged/discouraged indicators for buying and selling plus quarterly and annual assessments of progress. The result is insight, direction and support delivered through a combination of expert consulting and advanced proprietary software.

I run a classically managed fund and use very little quantitative support. Can Cabot Behavioral Analysis still help me?

Absolutely! Cabot has worked with all types of managers from the classic "stock pickers" to those running highly quantitative portfolios. Cabot Behavioral Analysis (CBA) has identified significant Buy and Sell opportunities in each portfolio analyzed, regardless of strategy, style or quantitative support.

Does Cabot Behavioral Analysis help with buying and selling?

Yes. Cabot Behavioral Analysis supports improvements for both buying and selling. In our experience, however, more fund managers identify greater opportunities to improve performance through behavioral shifts to their sell practices.

CBA analyzes buying and selling separately. Behavioral Shifts for improving both buying and selling can be implemented simultaneously. Many clients benefit from buy and sell shifts concurrently.

How can I be sure that the opportunities identified by Cabot Behavioral Analysis will be there tomorrow?

Identifying findings that are highly predictive for clients is a fundamental value of Cabot Behavioral Analysis (CBA). We use painstaking rigor to assure predictability including "out-of-sample" testing, Calendar-Year Return Time Series and P-Values (statistical test). CBA uses these conventional methods of advanced portfolio analysis to provide clients behavioral shifts that deliver.

Market cycles vary so much, how can I be sure that your results will not simply urge me towards a different style?

The analytic model underpinning our analysis (Impact) includes an industry standard 4-factor risk model. The risk model includes the Fama-French 3 factors (broad market, growth/value and large/small) plus momentum. Results based on this 4-factor risk model provide measures of opportunity that are truly persistent, not merely reflecting recent market conditions.

If I change some of my investment behaviors will it alter my strategy and/or style?

In a word, no. Cabot Behavioral Analysis (CBA) builds on the strengths of each manager, assisting them in shifting towards their most profitable decisions. Managers can confidently implement their chosen Behavioral Shifts knowing that the results will be stronger performance produced by their unique strategy and style.

Does Cabot Behavioral Analysis help me beat the market?

Cabot Behavioral Analysis (CBA) helps managers do more of what they already do well. It does this by focusing fund managers on that relatively small number of decisions they make that aren’t working. Assisting managers to better understand their strengths and shift away from ineffective tendencies enables them to capture the highest performance from their decisions. In this way the Cabot Behavioral Analysis helps managers to be their best … which can include beating the market.

How does Cabot Behavioral Analysis compare with Attribution Analysis?

Cabot Behavioral Analysis (CBA) enables managers to improve tomorrow's performance. It does this by enabling managers to understand their investment advantage and then helping them make better investment decisions that capitalize on their unique strengths and strategies. In contrast, Attribution Analysis explains the source of past performance based on portfolio holdings.

How does Cabot Behavioral Analysis compare with Transaction Cost Analysis?

Cabot Behavioral Analysis (CBA) helps fund managers make more profitable decisions. It does this, in part, by identifying persistent decision patterns and then determining how best to shift these behaviors to achieve stronger future performance. Transaction Cost Analysis, on the other hand, focuses downstream from the strategic decisions and measures trading effectiveness or the market impact of buying and selling.

Does Cabot Behavioral Analysis require that I speak with a psychologist?

Cabot Behavioral Analysis (CBA) is a rigorous implementation of Behavioral Finance. Scientifically sound and mathematically robust, CBA enables managers to learn exactly how to improve their own decisions and processes. CBA uses Cabot’s proprietary software to assess opportunities for improvement. The results are then used to shape Behavioral Shifts that capitalize on a manager’s strengths and help avoid non-optimizing behaviors. However, if you would like to speak with a psychologist that is up to you.