< The 2015 All-America Research Team

Total appearances: 1

Analyst debut: 2015

In his first appearance on this roster, Yin Luo secures second place. The Deutsche Bank Securities analyst also debuts on the Portfolio Strategy lineup, meriting a runner-up position, and extends his dominance of the Quantitative Research space to a fifth year. Clients value his broad expertise. “Luo recently initiated accounting coverage with a couple of interesting thought pieces that utilize quantitative tools and accounting data to uncover potential accounting abuses and an industry rotation model,” reports one fund manager. “His combination of quantitative analysis and forensic accounting can help investors narrow their focus from an almost unlimited amount of information to manageable key ratios that are likely to drive the investment process.” For his part Luo advises that the “most significant trend I see in the sector is how to identify accounting irregularities.” Traditionally, he notes, money managers recognize quality companies by looking at profitability metrics, including margins and returns on equity, as well as financial leverage and stability, based on analyst estimates. A “more sophisticated technique” is to assess earnings by examining the difference between cash flow from operations and net income, he says, since “management has little discretion on cash flow.” The financial community has a good grasp of “common items such as inventory, accounts payables and receivables,” yet few investors know the detailed accounting rules governing derivatives, income taxes and pensions, the 40-year-old researcher contends. Delving into those areas, he has developed a forensic model based on MSCI’s accounting and governance risk metrics and the application of probability theory to financial statement analysis to help detect anomalies and governance issues that can be predictive of share price performance. Specifically, corporations whose accounts do not conform to Benford’s Law — which projects probable distribution patterns in certain natural number data sets — have delivered stock returns that are 3 percent lower than average, while their volatility has been higher, on average, by 3 percent, Luo says. “When a company shows irregularity — either over time or compared to peer companies — it’s a red flag,” he insists. Luo is global head of quantitative strategy at Deutsche, which he joined in October 2009 after holding similar positions at Macquarie Capital and CIBC World Markets. He also served as a senior consultant at auditing giant KPMG. The analyst holds two MBAs, one in finance from the University of Windsor Odette School of Business and the other in management and accounting from the University of Toronto Rotman School of Management, as well as a bachelor’s degree in economics from Renmin University of China.