Methods and systems for measuring performance of a security analyst

• US 7,636,680 B2
• Filed: 07/12/2002
• Issued: 12/22/2009
• Est. Priority Date: 10/03/2001
• Status: Active Grant

• Current Assignee: Refinitiv US Organization, LLC (Refinitiv US Holdings, Inc.)
• Original Assignee: StarMine Corp. (The Woodbridge Co. Ltd.)
• Inventors: Gatto, Joseph
• Primary Examiner(s): Trammell; James P
• Assistant Examiner(s): Trotter; Scott S
• Application Number:
  US10/194,940
• Publication Number:
  US 20030065605A1
• Time in Patent Office: 2,720 Days
• Field of Search: 705/36.R, 705/36, 705/35
• US Class Current: 705/36.00R
• 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 computer-implemented method of measuring performance of a security analyst, comprising:

identifying a set of securities covered by the security analyst during a time period, wherein information relating to the set of securities covered by the security analyst is stored in a database coupled to a microprocessor;

calculating, on the microprocessor, a benchmark return for a benchmark portfolio during the time period, the benchmark portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the benchmark portfolio includes one unit of each security in the set of securities for which the security analyst had a rating during the time period;

calculating, on the microprocessor, a simulated return for a simulated portfolio during the time period, the simulated portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the simulated portfolio includes a weighted number of units of each security in the set of securities for which the security analyst had the rating during the time period; and

measuring, on the microprocessor, performance of the security analyst during the time period based on a difference between the benchmark return and the simulated return.

2. The method of claim 1, wherein each security in the benchmark portfolio is included in the benchmark portfolio for a subset of the time period, wherein the subset of the time period includes a portion of the time period during which the analyst had the rating for the respective security.

3. The method of claim 1, wherein the number of units of each security in the simulated portfolio is weighted based on analyst'"'"'s rating for the respective security during the time period.

4. The method of claim 3, wherein the simulated portfolio includes two units of each security in the set of securities for which the analyst had a strong buy rating during the time period, one unit of each security in the set of securities for which the analyst had a buy rating during the time period, one unit of cash for each security in the set of securities for which the analyst had a hold rating during the time period, and one negative unit of each security in the set of securities for which the analyst had a sell or a strong sell rating during the time period.

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

identifying a set of securities covered by the security analyst during a time period, wherein information related to the set of securities covered by the security analyst is stored in a database coupled to a microprocessor;

calculating, on the microprocessor, a benchmark return for a benchmark portfolio during the time period, the benchmark portfolio derived exclusively from a subset of the set of securities covered by the security analyst during the time period, wherein the subset of securities in the benchmark portfolio includes securities for which the security analyst had a rating during the time period, and wherein the benchmark return is calculated for the subset of securities during the time period;

calculating, on the microprocessor, a simulated return for a simulated portfolio during the time period, the simulated portfolio derived exclusively from the subset of securities in the benchmark portfolio, wherein the simulated portfolio includes constituents and weights for each of the securities in the subset of securities that are a function of a recommendation level associated with the security analyst'"'"'s rating for the respective security during the time period, and wherein the simulated return is calculated for the subset of securities during the time period; and

subtracting, on the microprocessor, the benchmark return from the simulated return, wherein a result of subtracting the benchmark return from the simulated return provides a measure of performance for the security analyst during the time period.

6. The method of claim 5, wherein each security in the benchmark portfolio is included in the benchmark portfolio for a subset of the time period, wherein the subset of the time period includes a portion of the time period during which the analyst had the rating for the respective security.

7. The method of claim 5, wherein the weights include a number of units for each security in the simulated portfolio based on the analyst'"'"'s rating for the respective security during the time period.

8. The method of claim 7, wherein the constituents and weights cause the simulated portfolio to include multiple units of each security rated at a strong buy recommendation level, one unit of each security rated at a buy recommendation level, one unit of cash for each security rated at a hold recommendation level, and one negative unit of each security rated at a sell or a strong sell recommendation level.

9. The method of claim 5, wherein the subset of securities includes all of the securities covered by the analyst during the time period.

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

11. The method of claim 10, wherein each of the constituents represent the function of the recommendation level associated with the analyst'"'"'s rating for the securities in the subset securities when the simulated portfolio is constructed or rebalanced.

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 each of the weights has a positive value.

14. The method of claim 10, wherein each of the weights 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 security rated at a higher recommendation level is assigned a weight that is greater than a weight assigned to a security rated at an adjacent lower recommendation level by the constant multiple.

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

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

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

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

21. The method of claim 6, wherein the simulated portfolio constituents are developed as a function of the recommendation level associated with the analyst'"'"'s rating when the simulated portfolio is constructed or rebalanced.

22. The method of claim 21, wherein when the simulated portfolio is constructed or rebalanced, each security for which the analyst has a rating or a proxy becomes one of the constituents based upon one or more portfolio inclusion rules, each of the rules depending on the recommendation level associated with the ahalyst'"'"'s rating for the security.

23. The method of claim 22, wherein a security rated at a neutral or a negative recommendation level is represented in the portfolio by a proxy.

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

25. The method of claim 24, wherein the risk free security includes at least one of a money market fund, a U.S. treasury bill, a short term international bond, or a zero-returning security.

26. The method of claim 21, wherein each of the weights include a size weighting derived from the recommendation level associated with the analyst'"'"'s rating for each of the securities in the subset of securities when the portfolio is constructed or rebalanced.

27. The method of claim 26, wherein the size weighting for each of the securities in the subset of securities is a function of market capitalization or float.

28. The method of claim 27, wherein the size weighting function includes proportional scaling.

29. The method of claim 27, wherein the size weighting function includes logarithmic scaling.

30. The method of claim 26, wherein the size weighting for each of the securities in the subset of securities includes an equal weight assigned to each of the securities when the portfolio is constructed or rebalanced.

31. The method of claim 27, wherein market capitalization is a monetary value of outstanding shares of the security.

32. The method of claim 27, wherein float is a monetary value of available shares of the security.

33. The method of claim 32, wherein the available shares are a number of outstanding shares of the security minus a number of shares of the security unavailable for investing.

34. The method of claim 33, wherein the shares unavailable for investing include one or more of large private holdings, employee stock ownership plans, corporate cross-owned shares, government holdings, or legally restricted shares.

35. The method of claim 5, wherein the result of subtracting the benchmark portfolio return from the simulated portfolio return represents a value add for the analyst.

36. The method of claim 35, further comprising:

multiplying the value add by an adjustment factor to create a risk adjusted value add for the analyst; and

storing the risk adjusted value add in a memory coupled to the microprocessor.

37. The method of claim 36, wherein the adjustment factor is a function of a weighted average of values representing a time series variation of a price for each of the securities covered by the analyst.

38. The method of claim 36, wherein the adjustment factor is a function of a value representing a variance among returns for each of the securities covered by the analyst.

39. The method of claim 36, further comprising:

using one or more of the value add or the risk adjusted value add to rank the analyst among a plurality of analysts.

40. The method of claim 35, further comprising:

calculating an aggregated value add for a plurality of analysts.

41. The method of claim 36, further comprising,

displaying a list that includes a plurality of analysts and their individual value adds or risk adjusted value adds.

42. The method of claim 40, wherein the plurality of analysts are defined according to one or more of a geographic location, a firm, a user specified group, or an industry.

43. The method of claim 36, further comprising:

determining a percent of analysts among a plurality of analysts that have a value add or a risk adjusted value add above a selected level.

44. The method of claim 36, further comprising:

comparing one or more of the value add or the risk adjusted value add for the analyst to value adds or risk adjusted value adds for plurality of analysts.

45. The method of claim 35, wherein the time period is divided into a plurality of intervals, the method further comprising:

creating a value add for each of the intervals by subtracting the benchmark return from the simulated return for each of the intervals;

creating a portfolio statistic for each of the intervals;

creating an average value add over all of the intervals;

creating an average portfolio statistic over all of the intervals by averaging the portfolio statistics for all the intervals;

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

storing the risk adjusted value add in a memory coupled to the microprocessor.

46. The method of claim 45, wherein each of the intervals is a monthly time period.

47. The method of claim 45, wherein the portfolio statistic is a value representing a variance among returns for each of the securities covered by the analyst during one of the intervals.

48. The method of claim 47, wherein the value representing the variance equals a standard deviation of the returns for each of the securities covered by the analyst during the interval.

49. The method of claim 35, wherein the time period is divided into a plurality of intervals, the method further comprising:

creating a value add for each of the intervals by subtracting the benchmark return from the simulated return for each of the intervals;

creating a portfolio statistic for each of the intervals;

dividing the value add by the portfolio statistic to create a risk adjusted value add for at least one of the intervals; and

storing the risk adjusted value add in a memory coupled to the microprocessor.

50. A computer-implemented method of measuring performance of a security analyst, comprising:

identifying a set of securities covered by the security analyst during a time period, wherein information relating to the set of securities covered by the security analyst is stored in a database coupled to a microprocessor;

calculating, on the microprocessor, a benchmark return for a benchmark portfolio during the time period, the benchmark portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the benchmark portfolio includes one unit of each security in the set of securities for which the security analyst had a rating during the time period;

generating, on the microprocessor, a simulated return for a simulated portfolio during the time period, the simulated portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the portfolio includes a weighted number of units of each security in the set of securities that is based on the security analyst'"'"'s rating for the respective security during the time period; and

storing a performance metric for the security analyst during the time period in a memory coupled to the microprocessor wherein the performance metric is based on a comparison between the benchmark return calculated for the benchmark portfolio and the simulated return generated for the simulated portfolio.

51. A computer-implemented method of measuring performance of a security analyst, comprising:

identifying a set of securities covered by the security analyst during a time periods, wherein information relating to the set of securities covered by the security analyst is stored in a database coupled to a microprocessor;

generating, on the microprocessor, a first benchmark return for a first portfolio during the time period, the first portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the first portfolio includes a first number of units of each security in the set of securities for which the security analyst had a rating during the time period;

generating, on the microprocessor, a second benchmark return for a second portfolio during the time period, the second portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the second portfolio includes a second number of units of each security in the set of securities for which the security analyst had the rating during the time period;

calculating, on the microprocessor, a performance metric for the security analyst during the time period based on a comparison between the first benchmark return generated for the first portfolio and the second benchmark return generated for the second portfolio; and

storing the performance metric in a memory coupled to the microprocessor.

52. A system for measuring performance of a security analyst, comprising:

a database configured to store information relating to a set of securities covered by the security analyst during a time period; and

a microprocessor coupled to the database and configured to;

identify the set of securities covered by the security analyst during the time period from the information stored in the database;

calculate a benchmark return for a benchmark portfolio during the time period, the benchmark portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the benchmark portfolio includes one unit of each security in the set of securities for which the security analyst had a rating during the time period;

calculate a simulated return for a simulated portfolio during the time period, the simulated portfolio derived exclusively from the set of securities covered by the security analyst during the time period, wherein the simulated portfolio includes a weighted number of units of each security in the set of securities for which the security analyst had the rating during the time period; and

measure performance of the security analyst during the time period based on'"'"'a difference between the benchmark return and the simulated return.

53. A system for measuring performance of a security analyst, comprising:

a database configured to store information relating to a set of securities covered by the security analyst during a time period; and

a microprocessor coupled to the database and configured to;

identify the set of securities covered by the security analyst during the time period from the information stored in the database;

calculate a benchmark return for a benchmark portfolio during the time period, the benchmark portfolio derived exclusively from a subset of the set of securities covered by the security analyst during the time period, wherein the subset of securities in the benchmark portfolio includes securities for which the security analyst had a rating during the time period, and wherein the benchmark return is calculated for the subset of securities during the time period;

calculate a simulated return for a simulated portfolio during the time period, the simulated portfolio derived exclusively from the subset of securities in the benchmark portfolio, wherein the simulated portfolio includes constituents and weights for each of the securities in the subset of securities that are a function of a recommendation level associated with the security analyst'"'"'s rating for the respective security during the time period, and wherein the simulated return is calculated for the subset of securities during the time period; and

subtract the benchmark return from the simulated return, wherein a result of subtracting the benchmark return from the simulated return provides a measure of performance for the security analyst during the time period.