System and method for assigning ratings to mutual funds and other investment funds based on the value of various future and option securities

• US 7,818,234 B1
• Filed: 11/08/2001
• Issued: 10/19/2010
• Est. Priority Date: 10/12/1999
• Status: Expired due to Fees

• Current Assignee: Sean J. Egan
• Original Assignee: Sean J. Egan
• Inventors: Egan, Sean J.
• Primary Examiner(s): Colbert; Ella
• Assistant Examiner(s): GREENE, DANIEL LAWSON
• Application Number:
  US10/010,102
• Time in Patent Office: 3,267 Days
• Field of Search: 705/36.R
• 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

The present invention is a system and method for assigning ratings on mutual funds and other investment funds based on values of financial futures for sectors corresponding to the funds. The method combines information on the historical rates of return and variability in the rates of return of the funds with the expected range of future returns for various asset classes as determined by the pricing of futures. The rating for the funds incorporates the range of expected future returns, the variability of past returns, and the level of risk.

Claims

1. A method for predicting expected returns of a fund, comprising the steps of:

operating a computer to select a sector corresponding to the fund,

operating the computer to identify financial futures corresponding to the sector,

operating the computer to calculate an expected return over a time period for the sector based on the financial futures corresponding to the sector,

operating the computer to calculate an expected range of future returns for the sector based on prices of options for the futures, and

operating the computer to calculate an expected annual return for the fund based on the expected annualized return for the corresponding sector, the expected range of returns for the corresponding sector, and at least one adjustment factor specific to the fund.

2. The method of claim 1, wherein said at least one adjustment factor includes an annual return adjustment factor equal to the difference between the annualized returns for the fund and a median return for other funds in the sector.

3. The method of claim 1, wherein said at least one adjustment factor includes a factor for the extent to which the funds returns are below the median for that sector for a time period.

4. The method of claim 1, wherein, in the step of calculating expected annual returns for the fund, an adjustment for qualitative factors is made.

5. The method of claim 1, wherein said step of calculating an expected annual return comprises the steps of calculating a low, and a high expected annual return.

6. The method of claim 1, wherein the expected return over the time period is an expected median return.

7. The method of claim 1, wherein

said at least one adjustment factor includes an annual return adjustment factor equal to the difference between the annualized returns for the fund and a median return for other funds in the sector, and a factor for the extent to which the funds returns are below the median for that sector for a time period;

in the step of calculating expected annual returns for the fund, an adjustment for qualitative factors is made;

said step of calculating an expected annual return comprises the steps of calculating a low, and a high expected annual return;

the expected return over the time period is an expected median return;

the sector is one of U.S. large capitalization funds, U.S. small capitalization funds and European large capitalization funds;

the expected return over a time period for the sector is calculated based on an annualization of a current value of an index for the sector and a futures price for the sector;

the expected range of future returns for the sector is calculated based on the prices of options for the futures and a option pricing model which is based on a current exercise prices of the options, a risk-free interest rate, current call prices for the options, and times until expirations of the options;

the at least one adjustment factor specific to the fund is a negative variability which is a percentage factor equal to an extent to which returns for the fund are below a median return for a period of time; and

the period of time for determining the negative variability is divided into selected periods, and a difference between the returns for the fund and the median return are calculated for each period.

8. The method of claim 1, wherein:

the sector is one of U.S. large capitalization funds, U.S. small capitalization funds and European large capitalization funds;

the expected return over a time period for the sector is calculated based on an annualization of a current value of an index for the sector and a futures price for the sector;

the expected range of future returns for the sector is calculated based on the prices of options for the futures and a option pricing model which is based on a current exercise prices of the options, a risk-free interest rate, current call prices for the options, and times until expirations of the options; and

the at least one adjustment factor specific to the fund is a negative variability which is a percentage factor equal to an extent to which returns for the fund are below a median return for a period of time.

9. The method of claim 8, wherein the period of time for determining the negative variability is divided into selected periods, and a difference between the returns for the fund and the median return are calculated for each period.