Hello everyone.
I have another question for today, the last one, I promise (for today…):
I would like to know which ranking method do you prefer or the one you use more frequently.
Default, Negative, Neutral or Normal distribution??
This question comes to my mind because I noticed that I get different results from a sim just changing the ranking method and now I’m little worry about what ranking method should I use or not …
It depends on what factors you use. If you use P/E, for instance, you must use default: negative. P/E gives all companies with negative earnings an N/A. The same can be said of price-to-book, price-to-cash flow, and EV/EBITDA, etc.
If you have a lot of factors that get N/As and you don’t use P/E, you should probably use default: neutral.
And if you’re designing your own formulae that depend on N/As being somewhere in the middle (I do this), then definitely use default: neutral and scrub your factors of P/E-like ratios.
Hello Yuval,
Thanks for your answer, but I’m little bit confused now, are there 3 or 4 ranking methods?
The “ranking system default” is the same as “Percentile NAs neutral”??
I’m not sure where that screenshot is referencing, but if that selection is in a “screen” then the default option is whatever the ranking system you’ve selected is built with / saved with/ intended to use. You can override the default by choosing one of the other options. So if if you have a ranking system with default of “NA neutral”, but want to override that in a screen to run “NAs negative” you can do that with this dropdown. I think there’s documentation on these somewhere in the tutorials or lessons.
Ok, I have had an “Aha” moment … I did not discover the “ranking method” tab until now. Feeling a little bit dumb today …
Thanks a lot for your help guys !!!