Looking at the table below, it's no surprise to see subfactors associated with safety, cash and value at the top end of the scale. Financial Strength was the only factor that consistently outperformed, while Buybacks and Debt were it for the subfactors. Clearly the credit problems and financial turmoil favoured companies with excess cash and steady business models - the kind of companies who tend to buy back their own stock. For the same reasons, companies free of debt and interest expenses were rewarded also. Growth related factors were punished, the worst of which was Organic Business Growth which predominantly favours expanding sales estimates. The rapidly shifting economic outlook shattered the confidence investors had in companies who had been expecting to grow revenue and operations. Obviously success in those areas requires economic confidence and often a credit supply to the companies themselves plus their customers.

Looking at the performance across the periods, it seems there was a flight to quality and value in the first period with Earnings Yield the leading subfactor. During the next period, as problems in the financial system grew more serious, healthy balance sheets were what investors were after - Liquidity, Cash, Buybacks and Low Debt were strongly in favour. During the 3rd period, as equity prices crumbled, economic data weakened and recession fears intensified, similar stock characteristics performed better, but overall the system's performance was quite poor. Even though 4 out of 5 system factor performed ok, the poor result and higher weighting of Price vs Earnings and Growth dragged the system down. Predictability of earnings and growth performed best, suggesting any available money in the market went to defensive stocks with predictable earnings. Although everything sold off in a big way, anything levered to economic growth caught the worst of it.

The table below details the performance of the factors and subfactors. Note that these numbers are based on the complete universe of stocks (the top 1500 US stocks by capitalisation, minus financials and utilities) whereas the previous backtesting article mentioned above uses numbers based only on the primary universe (S&P500 - financials and utilities). For this reason the total score and universe return numbers differ.