European Leisure "Investor positioning in European Leisure" Castle

Research evidence excerpt

European Leisure "Investor positioning in European Leisure" Castle

European Leisure UBS Research

crowding scores

Crowding can be defined as simply too many of the same type of market participants The absolute crowding scores can

holding the same/similar positions. This may occur in a stock, a derivative linked to a add value to risk management,

stock or a set of positions. The UBS Quant Research team leverages external and internal whilst the crowding momentum at

data sets to produce a score based on a complementary blend of prime brokerage data, the most and least crowded ends of

stock loan data, 13F regulatory filings, and other proprietary UBS inputs. the spectrum tends to deliver alpha.

The crowding scores range from -30 to +30, though there are few stocks in the tails. The

higher the score on the positive side implies that the stock is more crowded on the long

side, and vice versa the lower the score on the negative side. In this framework, a

'crowded long' is defined as being disproportionately owned by one type of client, and a

'crowded short' is defined as being disproportionately shorted by one type of client.

The UBS Quant team believes the absolute crowding scores add value to risk

management, i.e. if stocks are more crowded on the long side, then there is more risk of

greater selling on disappointment on results day. The crowding momentum (i.e. 1-

month and 3-month changes in crowding scores) at the most and least crowded ends of

the spectrum can deliver alpha.

For more information, please refer to our colleagues' work on crowding: Quantitative

Insights "A Definitive Approach to Crowding" and Quantitative Monographs "Alpha

from Crowding Momentum".

Crowding Life Cycle

One can imagine the life cycle of crowding in a particular stock. Initially, there are a