To determine the Bad News Factor we analyze a stock's declines in rising markets. In this purely objective analysis, the actual reasons for a stock's behavior are not important. If a stock price falls while its relative index goes up, it can be assumed that the stock's performance has been affected by bad news - hence the name, "Bad News Factor".

How to interpret the Bad News Factor:
Simply take the percentage difference (in basis points) between the rise of the index and the decline of the stock. For example, if a stock drops 2%, while during the same time period its reference index goes up 1%, the percentage difference is 3, or 300 basis points. Therefore, our Bad News Factor will be 300.

In bi-weekly intervals that correspond to our updates, we track a stock's movement over the course of a standard sliding 52-week period. Each time the stock goes down while its reference index goes up, the percentage difference is calculated, absorbed into the yearly average and expressed in basis points as the Bad News Factor.

As stocks rarely react in the same way the number used to calculate the average may differ from one stock to the next.

For example, the number 114 would mean that during the last 12 months, each time UBS went down when the SMI went up, the average of the differences measured between the respective performances was 1.14%.

Things to remember:

• The higher the Bad News Factor, the more a stock is sensitive to bad news.
• The smaller the Bad News Factor, the less the stock is sensitive to bad news, or said differently, the less investors seem to be concerned by the impact of bad news on the stock.