Why do it?

Innovation is one of many signals for evaluating a company for investment. To gauge the value of the innovation signal on its own, we recommend a walk forward analysis

What is it?

A walk forward analysis is an exercise in scenario and investment assessment. In a walk forward analysis, an investment scenario is defined for a historical time period, then that scenario is “walked forward” in time to determine investment performance for that scenario based on actual financial market data.

How are these walk forward analyses done?

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We begin by identifying the top 10 “innovative companies” in each sector using the highest innovation scores at a designated period in time.

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Next, we create a scenario to model investment performance over time in each sector. Performance of the investment is assessed – “walked forward” – after 1, 2, and 3 years.

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The performance of each sector investment scenario for the top 10 innovators is compared to the index of companies in each S&P 500 sector.

A scenario:

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