Methods and systems for measuring performance of a security analyst

• US 20030065605A1
• Filed: 07/12/2002
• Published: 04/03/2003
• Est. Priority Date: 10/03/2001
• Status: Active Grant

• Current Assignee: Refinitiv US Organization, LLC (Refinitiv US Holdings, Inc.)
• Original Assignee: Thomson Reuters LLC (The Woodbridge Co. Ltd.)
• Inventors: Gatto, Joseph
• Granted Patent: US 7,636,680 B2
• Time in Patent Office: Days
• US Class Current: 705/36
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method of measuring performance of a security analyst includes selecting an analyst that covers a set of securities, and a performance measurement time period. A value add is created by subtracting a return of a benchmark portfolio from a return of a simulated portfolio. The return of the benchmark portfolio is derived exclusively from a selected set of securities that are included in the set of securities covered by the analyst. The simulated portfolio has constituents and weights that are a function of the analyst'"'"'s recommendations on the securities in the selected set.

Claims

1. A method for use in measuring performance of a security analyst, comprising:

selecting an analyst that covers a set of securities;

selecting a performance measurement time period; and

calculating a benchmark portfolio return, the return of the benchmark portfolio being derived exclusively from a selected set of securities that are included in the set of securities covered by the analyst.

2. The method of claim 1, wherein securities covered by the analyst are securities on which the analyst has a recommendation or which are assigned to the analyst.

3. The method of claim 2, wherein the securities covered by the analyst can include recommendation levels or no recommendation.

4. The method of claim 3, wherein the recommendation levels are selected from at least one of, one or more positive levels, one or more negative levels and a neutral.

5. A method of measuring performance of a security analyst, comprising:

selecting an analyst that covers a set of securities;

selecting a performance measurement time period; and

subtracting a return of a benchmark portfolio from a return of a simulated portfolio, the return of the benchmark portfolio being derived exclusively from a selected set of securities that are included in the set of securities covered by the analyst, the simulated portfolio including constituents and weights that are a function of the analyst'"'"'s recommendations on the securities in the selected set.

6. The method of claim 5, wherein the set of securities covered by the analyst are securities on which the analyst has a recommendation or which are assigned to the analyst.

7. The method of claim 5, wherein the set of securities covered by the analyst include recommendation levels or no recommendation.

8. The method of claim 7, wherein the recommendation levels are selected from at least one of, one or more positive levels, one or more negative levels and a neutral.

9. The method of claim 5, wherein the return of the simulated portfolio is calculated on all of the securities covered by the analyst.

10. The method of claim 5, wherein the weights represent a monetary value of shares assigned to each portfolio constituent when the portfolio is constructed or rebalanced.

11. The method of claim 10, wherein the weight of each simulated portfolio constituent is developed as a function of the recommendation level of each security when the simulated portfolio is constructed or re-balanced, the weight of each benchmark portfolio constituent being evenly distributed when the benchmark portfolio is constructed or re-balanced.

12. The method of claim 10, wherein all of the weights are normalized and sum to a value of 1.

13. The method of claim 10, wherein all of the weights are positive.

14. The method of claim 12, wherein each weight has a weighting level

15. The method of claim 14, wherein a difference in weights between two adjacent weighting levels is a constant multiple.

16. The method of claim 15, wherein for adjacent recommendation levels, a higher recommendation level is assigned a weight that is a constant multiple, and the constant multiple is greater than a weight assigned to an adjacent lower recommendation level.

17. The method of claim 5, wherein securities rated a higher positive level recommendation are assigned a weight greater than or equal to a weight assigned to securities with a lower positive level recommendation.

18. The method of claim 5, wherein securities rated with a negative level recommendation are assigned a weight less than or equal to securities with a non-negative recommendation.

19. The method of claim 5, wherein securities rated with a positive level recommendation are assigned a weight greater than or equal to securities with a non-positive level recommendation.

20. The method of claim 5, wherein securities rated as a negative level are assigned a weight that is proportional to their return multiplied by a number less than zero.

21. The method of claim 5, wherein the simulated portfolio constituents are developed as a function of the analysts recommendations when the simulated portfolio is constructed or re-balanced.

22. The method of claim 21, wherein when the simulated portfolio is constructed or re-balanced, each security rated by the analyst or a proxy for each security rated by the analyst becomes a constituent based upon a set of portfolio inclusion rules, and each rule depends on the rating level assigned to the security.

23. The method of claim 22, wherein a security with a neutral rating is represented in the portfolio by a proxy.

24. The method of claim 22, wherein a security with a negative level rating is represented in the portfolio by a proxy.

25. The method of claim 22, wherein the proxy for securities rated at one or more of the rating levels is the benchmark portfolio.

26. The method of claim 22, wherein the proxy for securities rated at one or more of the rating levels is a risk free security.

27. The method of claim 26, wherein the risk free security is selected from one of a money market fund, a U.S. treasury bill, a short term international bond, and a zero-returning security.

28. The method of claim 21, wherein the weight of each simulated portfolio constituent is developed as a function of a measure of size and the recommendation level of each security when the simulated portfolio is constructed or re-balanced, and the weight of each benchmark portfolio constituent is developed as a function of a size measure of each security in the benchmark portfolio when the benchmark portfolio is constructed or rebalanced.

29. The method of claim 28, wherein the size weighting is a function of market capitalization or float.

30. The method of claim 29, wherein the function includes proportional scaling.

31. The method of claim 29, wherein the function includes logarithmic scaling.

32. The method of claim 28, wherein when the simulated portfolio is constructed or re-balanced, the size weighting of each security in the simulated portfolio is assigned an equal value.

33. The method of claim 29, wherein market capitalization is a monetary value of outstanding shares of each security in the simulated portfolio.

34. The method of claim 29, wherein float is a monetary value of available shares of each security in the simulated portfolio.

37. A method of measuring performance of a security analyst, comprising:

selecting an analyst that covers a set of securities, and a performance measurement time period; and

creating a value add by subtracting a return of a benchmark portfolio from a return of a simulated portfolio, the return of the benchmark portfolio being derived exclusively from a selected set of securities that are included in the set of securities covered by the analyst, the simulated portfolio including constituents and weights that are a function of the analyst'"'"'s recommendations on the securities in the selected set.

38. A method of measuring performance of a security analyst'"'"'s recommendations, comprising:

creating a value add by subtracting a return of a benchmark portfolio from a return of a simulated portfolio, the return of the benchmark portfolio being derived exclusively from a selected set of securities that are included in the set of securities covered by the analyst, the simulated portfolio including constituents and weights that are a function of the analyst'"'"'s recommendations on the securities in the selected set; and

multiplying the value add by an adjustment factor to create a risk adjusted value add to compare different analysts.

35. The method of claim 39, wherein the available shares is the number of security shares outstanding minus the number of shares unavailable for investing.

36. The method of claim 35, wherein at least a portion of the shares unavailable for investing are selected from large private holdings, employee stock ownership plans, corporate cross-owned shares, government holdings, and legally restricted shares.

39. The method of claim 38, wherein securities covered by the analyst are securities on which the analyst has a recommendation or which are assigned to the analyst.

40. The method of claim 39, wherein securities covered by the analyst can include recommendation levels or no recommendation.

41. The method of claim 38, wherein the adjustment factor is 1.

42. The method of claim 38, wherein the adjustment factor is a function of a weighted average of values that are each representative of a time series variation of a price of each security covered by the analyst.

43. The method of claim 38, wherein the adjustment factor is a value that is representative of the variance across returns of the securities covered by the analyst.

44. The method of claim 38, wherein the adjustment factor is a function of a weighted average of values that are each representative of a time series variation of a price of each security covered by the analyst and a variance across returns of the securities covered by the analyst.

45. The method of claim 38, further comprising:

using the value add to create a rank order of analysts.

46. The method of claim 38, further comprising:

calculating an aggregated value add for a group of analysts.

47. The method of claim 38, further comprising,

displaying a list of individual analysts and their individual value adds.

48. The method of claim 46, wherein the group is defined from a geographic location, a firm, a user specified group, and an industry.

49. The method of claim 38, further comprising:

determining a percent of analysts within a group that have a value add above a selected level.

50. The method of claim 49, wherein the group is defined from a geographic location, a firm, a user specified group, and an industry.

51. The method of claim 38, further comprising:

comparing a value add of one analyst to value adds of a group of analysts.

52. The method of claim 51, wherein the group is defined from a geographic location, a firm, a user specified group, and an industry.

53. A method of measuring performance of a security analyst'"'"'s recommendations, comprising:

selecting a performance measurement time period that is divided into a plurality of intervals;

creating a value add for each of an interval by subtracting a return of a benchmark portfolio from a return of a simulated portfolio, the return of the benchmark portfolio being derived exclusively from a selected set of securities that are included in a set of securities covered by the analyst, the simulated portfolio including constituents and weights that are a function of the analyst'"'"'s recommendations on the securities in the selected set;

creating a portfolio statistic for each interval;

creating an average value add over all of the intervals;

creating an average portfolio statistic by averaging portfolio statistics of all intervals; and

dividing the average value add by the average portfolio statistic to create a risk adjusted value add.

54. The method of claim 53, wherein the each interval is a monthly time period.

55. The method of claim 53, wherein the portfolio statistic is a value that is representative of a variation during an interval of returns for all securities covered by the analyst.

56. The method of claim 55, wherein the value that is representative of the variation is equal to a standard deviation of the interval returns of all securities covered by the analyst.

57. A method of measuring performance of a security analyst'"'"'s recommendations, comprising:

selecting a performance measurement time period that is divided into a plurality of intervals;

creating a value add for each of an interval by subtracting a return of a benchmark portfolio from a return of a simulated portfolio, the return of the benchmark portfolio being derived exclusively from a selected set of securities that are included in a set of securities covered by the analyst, the simulated portfolio including constituents and weights that are a function of the analyst'"'"'s recommendations on the securities in the selected set;

creating a portfolio statistic for each interval;

creating a ratio of value add divided by portfolio statistic for at least one interval.