Non-capitalization weighted indexing system, method and computer program product

US 8,374,937 B2
Filed: 11/16/2009
Issued: 02/12/2013
Est. Priority Date: 04/10/2002
Status: Active Grant

First Claim

Patent Images

1. A computer implemented method for trading a plurality of financial securities based on an index, the method performed by at least one processor configured to perform the method, the method comprising enabling the at least one processor to perform:

(A) selecting by the at least one processor a portfolio of financial securities for trading according to the index; and

(B) trading by the at least one processor one or more financial securities of said portfolio of financial securities based on the index,the index having been constructed based on a method of constructing the index configured to be performed by at least one processor, the method of constructing the index comprising enabling the at least one processor to perform;

(a) accessing by the at least one processor of one or more databases storing and permitting retrieval of data about a plurality of entities and a plurality of corresponding financial securities each issued by or having been issued by at least one of the plurality of entities;

(b) receiving by the at least one processor at least one criterion of the index;

(c) receiving by the at least one processor at least one objective measure of scale regarding one or more of the plurality of entities associated with said corresponding financial securities;

(d) retrieving by the at least one processor one or more of said data about a plurality of said entities and said corresponding financial securities;

(e) selecting a subset of said data by the at least one processor said one or more data to be a quantitative data reflecting the amount of said at least one objective measure of scale associated with each of said entities, wherein said objective measure of scale is substantially independent of;

(i) the market prices of any of said financial securities; and

(ii) the market capitalization of any of said entities,wherein said at least one objective measure of scale comprises a measure of the size of each said entity associated with each said given financial securities, and wherein said measure of the size of each said entity corresponding to each said financial securities comprises at least one of;

gross revenue of a said entity associated with a said financial security,sales of a said entity associated with a said financial security,debt to equity adjusted sales of a said entity,earnings of a said entity associated with a said financial security,income of a said entity associated with a said financial security,earnings before interest and tax (EBIT) of a said entity associated with a said financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with a said financial security,number of employees of a said entity associated with a said financial security,book value of a said entity associated with a said financial security,cumulative retained cashflow of a said financial security,assets of a said entity associated with a said financial security,liabilities of a said entity associated with a said financial security,net worth of a said entity associated with a said financial security,cashflow of a said entity associated with a said financial security,any dividends of a said entity associated with a said financial security,any distribution to financial security holders by a said entity,any financial security buybacks by a said entity,an attribute relating to employees of a said entity associated with a said financial security,an attribute relating to floor space of a said entity associated with a said financial security,an attribute relating to office space of a said entity associated with a said financial security,an attribute relating to location of a said entity associated with a said financial security,a demographic measure (DM) of a said entity associated with a said financial security, ora measure relating to a demographic attribute of a said entity associated with a said financial security;

(f) ranking by the at least one processor said entities based upon a said quantitative data associated with the at least one objective measure of scale of each of said entities;

(g) selecting by the at least one processor a subset based on said at least one criterion of the index of financial securities of the entities meeting said at least one criterion of said quantitative data to comprise the plurality of constituent index financial securities exclusively comprising the index of financial securities; and

(h) calculating by the at least one processor percentage weights for the index of financial securities to be objective measure of scale weights substantially independent of(i) any of said market prices of any of said financial securities; and

(ii) any of said market capitalization of any of said entities,wherein the calculating comprises;

(i) adding the quantitative data of each of said at least one objective measure of scale for all of said constituent index financial securities to yield a sum total quantitative data for said at least one objective measure of scale; and

(ii) dividing a said quantitative data of a said at least one objective measure of scale for each said constituent index financial securities by the sum total quantitative data to yield the objective measure of scale weight of each of the constituent index financial securities comprising the index of financial securities,wherein said at least one objective measure of scale comprises a measure of the size of each said entity associated with each said given constituent index financial security, andwherein said measure of the size of each said entity corresponding to each said constituent index financial security comprises at least one of;

gross revenue of a said entity associated with said constituent index financial security,sales of a said entity associated with said constituent index financial security,debt to equity adjusted sales of a said entity associated with a said financial security,earnings of a said entity associated with a said financial security,income of a said entity associated with said constituent index financial security,earnings before interest and tax (EBIT) of a said entity associated with said constituent index financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with said constituent index financial security,number of employees of a said entity associated with said constituent index financial security,book value of a said entity associated with said constituent index financial security,cumulative retained cashflow of a said entity,assets of a said entity associated with said constituent index financial security,liabilities of a said entity associated with said constituent index financial security,net worth of a said entity associated with said constituent index financial security,cashflow of a said entity associated with said constituent index financial security,any dividends of a said entity associated with said constituent index financial security,any distribution to financial security holders by a said entity,any financial security buybacks by a said entity,an attribute relating to employees of a said entity associated with said constituent index financial security,an attribute relating to floor space of a said entity associated with said constituent index financial security,an attribute relating to office space of a said entity associated with said constituent index financial security,an attribute relating to location of a said entity associated with said constituent index financial security,a demographic measure (DM) of a said entity associated with said constituent index financial security, ora measure relating to a demographic attribute of a said entity associated with said constituent index financial security.

View all claims

1 Assignment

Timeline View

Assignment View

0 Petitions

Accused Products

Abstract

An investment system based on indexes created from various metrics is disclosed. The indexes may be built by selecting from a universe of assets, a subset using selection and weighting metrics substantially independent of market capitalization weighting, price weighting, or equal weighting. These metrics may include, but are not limited to book value, sales, dividends, cash flow, employees, demographics, etc. A combination of financial non-market capitalization metrics may be used along with non-financial metrics to create passive investment systems. Once the index is built, it may be used as a basis to purchase securities for a portfolio. As the data underlying the indexes change because of, e.g., economic activity, the index may be updated and may be used as a basis to rebalance the portfolio. Valuation indifferent indexes of the present invention avoid overexposure to overvalued securities and underexposure to undervalued securities, as compared with conventional capitalization-weighted price-weighted indexes.

369 Citations

97 Claims

1. A computer implemented method for trading a plurality of financial securities based on an index, the method performed by at least one processor configured to perform the method, the method comprising enabling the at least one processor to perform:
- (A) selecting by the at least one processor a portfolio of financial securities for trading according to the index; and
  
  (B) trading by the at least one processor one or more financial securities of said portfolio of financial securities based on the index,the index having been constructed based on a method of constructing the index configured to be performed by at least one processor, the method of constructing the index comprising enabling the at least one processor to perform;
  
  (a) accessing by the at least one processor of one or more databases storing and permitting retrieval of data about a plurality of entities and a plurality of corresponding financial securities each issued by or having been issued by at least one of the plurality of entities;
  
  (b) receiving by the at least one processor at least one criterion of the index;
  
  (c) receiving by the at least one processor at least one objective measure of scale regarding one or more of the plurality of entities associated with said corresponding financial securities;
  
  (d) retrieving by the at least one processor one or more of said data about a plurality of said entities and said corresponding financial securities;
  
  (e) selecting a subset of said data by the at least one processor said one or more data to be a quantitative data reflecting the amount of said at least one objective measure of scale associated with each of said entities, wherein said objective measure of scale is substantially independent of;
  
  (i) the market prices of any of said financial securities; and
  
  (ii) the market capitalization of any of said entities,wherein said at least one objective measure of scale comprises a measure of the size of each said entity associated with each said given financial securities, and wherein said measure of the size of each said entity corresponding to each said financial securities comprises at least one of;
  
  gross revenue of a said entity associated with a said financial security,sales of a said entity associated with a said financial security,debt to equity adjusted sales of a said entity,earnings of a said entity associated with a said financial security,income of a said entity associated with a said financial security,earnings before interest and tax (EBIT) of a said entity associated with a said financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with a said financial security,number of employees of a said entity associated with a said financial security,book value of a said entity associated with a said financial security,cumulative retained cashflow of a said financial security,assets of a said entity associated with a said financial security,liabilities of a said entity associated with a said financial security,net worth of a said entity associated with a said financial security,cashflow of a said entity associated with a said financial security,any dividends of a said entity associated with a said financial security,any distribution to financial security holders by a said entity,any financial security buybacks by a said entity,an attribute relating to employees of a said entity associated with a said financial security,an attribute relating to floor space of a said entity associated with a said financial security,an attribute relating to office space of a said entity associated with a said financial security,an attribute relating to location of a said entity associated with a said financial security,a demographic measure (DM) of a said entity associated with a said financial security, ora measure relating to a demographic attribute of a said entity associated with a said financial security;
  
  (f) ranking by the at least one processor said entities based upon a said quantitative data associated with the at least one objective measure of scale of each of said entities;
  
  (g) selecting by the at least one processor a subset based on said at least one criterion of the index of financial securities of the entities meeting said at least one criterion of said quantitative data to comprise the plurality of constituent index financial securities exclusively comprising the index of financial securities; and
  
  (h) calculating by the at least one processor percentage weights for the index of financial securities to be objective measure of scale weights substantially independent of(i) any of said market prices of any of said financial securities; and
  
  (ii) any of said market capitalization of any of said entities,wherein the calculating comprises;
  
  (i) adding the quantitative data of each of said at least one objective measure of scale for all of said constituent index financial securities to yield a sum total quantitative data for said at least one objective measure of scale; and
  
  (ii) dividing a said quantitative data of a said at least one objective measure of scale for each said constituent index financial securities by the sum total quantitative data to yield the objective measure of scale weight of each of the constituent index financial securities comprising the index of financial securities,wherein said at least one objective measure of scale comprises a measure of the size of each said entity associated with each said given constituent index financial security, andwherein said measure of the size of each said entity corresponding to each said constituent index financial security comprises at least one of;
  
  gross revenue of a said entity associated with said constituent index financial security,sales of a said entity associated with said constituent index financial security,debt to equity adjusted sales of a said entity associated with a said financial security,earnings of a said entity associated with a said financial security,income of a said entity associated with said constituent index financial security,earnings before interest and tax (EBIT) of a said entity associated with said constituent index financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with said constituent index financial security,number of employees of a said entity associated with said constituent index financial security,book value of a said entity associated with said constituent index financial security,cumulative retained cashflow of a said entity,assets of a said entity associated with said constituent index financial security,liabilities of a said entity associated with said constituent index financial security,net worth of a said entity associated with said constituent index financial security,cashflow of a said entity associated with said constituent index financial security,any dividends of a said entity associated with said constituent index financial security,any distribution to financial security holders by a said entity,any financial security buybacks by a said entity,an attribute relating to employees of a said entity associated with said constituent index financial security,an attribute relating to floor space of a said entity associated with said constituent index financial security,an attribute relating to office space of a said entity associated with said constituent index financial security,an attribute relating to location of a said entity associated with said constituent index financial security,a demographic measure (DM) of a said entity associated with said constituent index financial security, ora measure relating to a demographic attribute of a said entity associated with said constituent index financial security.
- View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 29, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82)
- - 2. The computer implemented method of claim 1, wherein the portfolio of financial securities comprises at least one of:
    - a fund (F);
      
      a mutual fund (MF);
      
      a fund of funds (FF);
      
      an financial security account;
      
      an exchange traded fund (ETF);
      
      a separate account;
      
      a comingled account;
      
      a pooled trust;
      
      a limited liability company;
      
      ora limited partnership.
  - 3. The computer implemented method according to claim 1, wherein said method further comprises:
    - rebalancing the portfolio of financial securities based on the index of assets.
  - 4. The computer implemented method according to claim 3, wherein said rebalancing is performed on a periodic basis.
  - 5. The computer implemented method according to claim 3, wherein said rebalancing is based upon the constituent financial securities reaching a threshold value.
  - 6. The computer implemented method according to claim 3, wherein said rebalancing is performed on a periodic basis.
  - 7. The computer implemented method according to claim 3, wherein said rebalancing is based upon the constituent financial securities reaching a threshold value.
  - 8. The method of claim 1, wherein said financial securities comprises:
    - at least one unit of interest in at least one of;
      
      an asset;
      
      a liability;
      
      a tracking portfolio;
      
      a financial instrument or a security, wherein said financial instrument or said security denotes at least one of a debt, an equity interest, or a hybrid;
      
      a derivatives contract, including at least one of;
      
      a future, a forward, a put, a call, an option, a swap, or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability;
      
      a fund;
      
      oran investment entity or account of any kind, including an interest in, or rights relating to at least one of;
      
      a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, or any other pooled or separately managed investments.
  - 9. The computer implemented method according to claim 1 wherein the index of financial securities comprises an accounting data index (ADI), the method comprising:
    - a) receiving, by at least one processor, the ADI from an index provider, wherein the index provider previously constructed the ADI and stored the ADI on at least one analysis host processor,the at least one analysis host processor of the index provider comprising at least one processor,at least one of the at least one processors adapted to access by the at least one analysis host processor one or more databases storing and permitting retrieval of data about a plurality of entities and a plurality of corresponding financial securities each issued by or having been issued by at least one of the plurality of entities;
      
      at least one of the at least one processors adapted to receive by the at least one analysis host processor the at least one measure of scale regarding one or more of the plurality of financial securities or one or more of the plurality of the entities associated with the corresponding financial securities;
      
      at least one of the at least one processors adapted to retrieve by the at least one analysis host processor one or more of the data about the plurality of the entities and the corresponding financial securities;
      
      at least one of the at least one processors adapted to receive a universe of the financial securities;
      
      at least one of the at least one processors adapted to select a subset of the universe of the financial securities based on any measure of scale of the entities of the financial objects to obtain a subset of the universe;
      
      at least one of the at least one processors adapted to select a plurality of financial securities of the subset based upon at least one accounting data related to the entities of the financial object to obtain a plurality of constituent index assets of the ADI; and
      
      at least one of the at least one processors adapted to weight said plurality of financial securities based upon at least one accounting data related to the entities of the financial securities to obtain a plurality of constituent weightings of the financial securities of the ADI; and
      
      b) purchasing, by the at least one processor, a portfolio of financial securities by at least one trading host comprising at least one processor, said portfolio of financial securities comprising the plurality of constituent assets of the ADI in proportion to the constituent weights of the ADI received.
  - 10. The method according to claim 9, further comprising:
    - c) altering, by the at least one processor based on user input, said portfolio of financial securities by said at least one trading host comprising said at least one processor, when the ADI received from the index provider changes over time, said altering comprising at least one of;
      
      i) purchasing by said at least one trading host at least one of;
      
      constituent financial securities of the ADBI, or any new constituent financial securities of the ADI over time;
      
      ii) purchasing by said at least one trading host any additional constituent financial securities based on changes in the constituent weights of the constituent financial securities making up the ADI over time;
      
      iii) selling by said at least one trading host any previous constituent financial securities no longer components of the ADI over time;
      
      oriv) selling by said at least one trading host any previous constituent financial securities necessitated by changes in the calculated weights of the constituent financial securities over time.
  - 11. The method of claim 1, wherein the method of constructing the index is performed by at least one of:
    - an index designer, an index calculator, or an index provider.
  - 12. The method of claim 1, wherein the method of trading is performed by at least one of:
    - a portfolio provider, an index calculator, or an index provider.
  - 13. The method of claim 1, wherein the method of constructing the index is performed in advance of said method of trading.
  - 14. The method of claim 1, wherein the method of constructing the index is performed periodically, and the method of trading is performed as the constituents and the weightings of the index of financial securities changes over time.
  - 15. The method of claim 1, wherein the method of trading comprises trading based on rebalancing the portfolio of financial securities over time.
  - 16. The method of claim 1, wherein the method of constructing the index comprises rebalancing the index of financial securities over time.
  - 17. The method of claim 1, wherein said ranking comprises determining whether a given financial security should be included in the index.
  - 18. The method of claim 1, wherein said ranking comprises ordering by a value of said at least one objective measure of scale.
  - 19. The method according to claim 1, wherein said trading based on the index comprises:
    - receiving, by at least one processor, the index and considering the index as a universe of financial securities;
      
      determining, by the at least one processor, a subset of the universe of the financial securities based on any measure of scale of the entities of the financial objects to obtain said subset of financial securities of the universe of financial securities; and
      
      trading based on said subset of financial objects.
  - 29. The computer implemented method of claim 1,wherein the subset comprises a group of entities greater than 500.
  - 34. The computer implemented method according to claim 1, wherein said each of said financial securities comprises at least one of a stock (S);
    - a commodity (CO);
      
      a futures contract (FC);
      
      a bond (B);
      
      a municipal bond (MB);
      
      a corporate bond (CB);
      
      a mutual fund (MF);
      
      a hedge fund (HF);
      
      a fund of funds (FF);
      
      an exchange traded fund (ETF);
      
      or a derivative (DE).
  - 35. The computer implemented method according to claim 1, wherein each of said financial securities comprises a stock (S).
  - 36. The computer implemented method according to claim 1, wherein each of said financial securities comprises a commodity (CO).
  - 37. The computer implemented method according to claim 1, wherein each of said financial securities comprises a futures contract (FC).
  - 38. The computer implemented method according to claim 1, wherein each of said financial securities comprises a bond (B).
  - 39. The computer implemented method according to claim 1, wherein each of said financial securities comprises a mutual fund (MF).
  - 40. The computer implemented method according to claim 1, wherein each of said financial securities comprises a hedge fund (HF).
  - 41. The computer implemented method according to claim 1, wherein each of said financial securities comprises a fund of funds (FF).
  - 42. The computer implemented method according to claim 1, wherein each of said financial securities comprises an exchange traded fund (ETF).
  - 43. The computer implemented method according to claim 1, wherein each of said financial securities comprises a derivative (DE).
  - 44. The computer implemented method according to claim 1, wherein said weighting comprises performing a negative weighting on any of said financial securities.
  - 45. The computer implemented method according to claim 44, wherein said negative weighting is performed for purposes of at least one of:
    - establishing or measuring performance, for at least one of;
      
      any security (S);
      
      a portfolio of financial securities (PA);
      
      a hedge fund (HF);
      
      or at least one of;
      
      a long or a short position.
  - 46. The computer implemented method according to claim 1, wherein said at least one objective measure of scale comprises a measure relating to at least one of an underlying attribute of one or more of the financial securities, or a said entity associated with a said financial security.
  - 47. The computer implemented method according to claim 1, (i) wherein said sales comprises at least one of:
    - total sales, foreign sales, domestic sales, net sales, net revenue or gross sales, (ii) wherein said book value comprises at least one of;
      
      a value adjusted for inflation, a value adjusted for replacement or a value adjusted for liquidation value, (iii) wherein the cash flow comprises at least one of;
      
      a said entity associated with a said financial security, or future value of expected cash flow of a said entity associated with a said financial security, and (iv) wherein said at least one objective measure of scale associated with any said financial securities comprises at least one of;
      
      profitability of a said entity associated with a said financial security;
      
      retained earnings of a said entity associated with a said financial security;
      
      earnings per share of a said entity associated with a said financial security;
      
      reported profits of a said entity associated with a said financial security;
      
      reported pre-exceptional entity of a said entity associated with a said financial security;
      
      value of an expected cash flow of a said entity associated with a said financial security;
      
      dividends of a said entity associated with a said financial security;
      
      assets of a said entity associated with a said financial security;
      
      tangible assets of a said entity associated with a said financial security;
      
      intangible assets of a said entity associated with a said financial security;
      
      fixed assets of a said entity associated with a said financial security;
      
      property of a said entity associated with a said financial security;
      
      plant of a said entity associated with a said financial security;
      
      equipment of a said entity associated with a said financial security;
      
      goodwill of a said entity associated with a said financial security;
      
      replacement value of assets of a said entity associated with a said financial security;
      
      liquidation value of assets of a said entity associated with a said financial security;
      
      liabilities of a said entity associated with a said financial security;
      
      long term liabilities of a said entity associated with a said financial security;
      
      short term liabilities of a said entity associated with a said financial security;
      
      net worth of a said entity associated with a said financial security;
      
      research and development expense of a said entity associated with a said financial security;
      
      accounts receivable of a said entity associated with a said financial security;
      
      accounts payable of a said entity associated with a said financial security;
      
      cost of goods sold (CGS) of a said entity associated with a said financial security;
      
      budget of a said entity associated with a said financial security;
      
      capital budget of a said entity associated with a said financial security;
      
      cash budget of a said entity associated with a said financial security;
      
      direct labor budget of a said entity associated with a said financial security;
      
      factory overhead budget of a said entity associated with a said financial security;
      
      operating budget of a said entity associated with a said financial security;
      
      sales budget of a said entity associated with a said financial security;
      
      liquidity of a said entity associated with a said financial security;
      
      book income of a said entity associated with a said financial security;
      
      tax income of a said entity associated with a said financial security;
      
      capitalization of earnings of a said entity associated with a said financial security;
      
      capitalization of goodwill of a said entity associated with a said financial security;
      
      capitalization of interest of a said entity associated with a said financial security;
      
      capitalization of revenue of a said entity associated with a said financial security;
      
      capital spending of a said entity associated with a said financial security;
      
      cash of a said entity associated with a said financial security;
      
      compensation of a said entity associated with a said financial security;
      
      overhead costs of a said entity associated with a said financial security;
      
      liquidation value of entity of a said entity associated with a said financial security;
      
      capitalization of cash of a said entity associated with a said financial security;
      
      capitalization of earnings of a said entity associated with a said financial security;
      
      capitalization of revenue of a said entity associated with a said financial security;
      
      orvalue of expected measure of scale of a said entity associated with a said financial security.
  - 48. The computer implemented method according to claim 1, wherein said at least one objective measure of scale comprises a ratio of any combination of objective measures of scale relating to one or more of said financial securities and the ratio is not based on any one of:
    - weighting said one or more financial securities based on market capitalization;
      
      equal weighting;
      
      orweighting in proportion to the market price of said one or more financial securities.
  - 49. The computer implemented method according to claim 48, wherein said ratio of any combination of said objective measures of scale comprises at least one of:
    - current ratio,debt ratio,overhead expense as a percent of sales, ordebt service burden ratio.
  - 50. The computer implemented method according to claim 1, wherein said at least one objective measure of scale comprises said demographic measure of said entity of said financial security, and wherein said demographic measure comprises at least one of a financial attribute, an accounting data attribute, a non-financial attribute, a non-accounting data attribute.
  - 51. The computer implemented method according to claim 1, wherein said measure of scale comprises a demographic measure comprising any accounting data appearing in an annual report of a said entity.
  - 52. The computer implemented method according to claim 1, wherein said objective measure of scale comprises at least one of:
    - a financial metric;
      
      a non-financial metric;
      
      a non-market related metric;
      
      a number of employees;
      
      a floor space;
      
      oran office space.
  - 53. The method according to claim 1, wherein said at least one objective measure of scale comprises an economic indicator (EI).
  - 54. The computer implemented method according to claim 1, wherein said at least one objective measure of scale comprises a measure tied to a particular geography associated with at least one of the financial securities or the entity.
  - 55. The computer implemented method of claim 1, wherein the portfolio of financial securities comprises at least one of:
    - a fund (F);
      
      a mutual fund (MF);
      
      a fund of funds (FF);
      
      an financial security account;
      
      an exchange traded fund (ETF);
      
      a separate account;
      
      a pooled trust;
      
      ora limited partnership.
  - 56. The computer implemented method according to claim 1, comprising:
    - selecting a subset of the portfolio of financial securities for trading; and
      
      trading said subset of one or more of said financial securities of said portfolio of financial securities based on the index of financial securities.
  - 57. The computer implemented method according to claim 1, wherein said trading comprises:
    - rebalancing the portfolio of financial securities based on the index of financial securities.
  - 58. The computer implemented method according to claim 57, wherein said rebalancing is performed on a periodic basis.
  - 59. The computer implemented method according to claim 57, wherein said rebalancing is based upon the constituent financial securities reaching a threshold value.
  - 60. The computer implemented method according to claim 57, further comprising:
    - applying one or more rules associated with the index of financial securities.
  - 61. The computer implemented method according to claim 1, wherein the method of constructing the index is used for at least one of:
    - investment management;
      
      or investment portfolio benchmarking.
  - 62. The computer implemented method of claim 1, wherein the index construction method further comprises an enhanced index investing method, comprising:
    - constructing a portfolio of financial securities in a fashion in which at least one of;
      
      holdings;
      
      performance;
      
      or characteristics, are substantially similar to the index of financial securities.
  - 63. The computer implemented method according to claim 1, wherein the method further comprises:
    - gathering data about the plurality of financial securities by an index construction manager device comprising computerized databases.
  - 64. The computer implemented method according to claim 1, wherein said at least one objective measure of scale comprises at least one of a financial metric, or a non-financial metric.
  - 65. The computer implemented method of claim 1, wherein the index construction method further comprises at least one of:
    - (i) selecting a group of entities having at least a minimum measure of size above a first threshold value;
      
      (ii) selecting a group of entities having at least a minimum level of liquidity surpassing a second threshold value;
      
      or (iii) selecting a group of entities having at least a minimum number of tradeable financial securities outstanding above a predetermined third threshold value.
  - 66. The computer implemented method of claim 1, wherein said plurality of entities comprises all publicly traded companies.
  - 67. The computer implemented method of claim 1, wherein said calculating comprises mathematical blending.
  - 68. The computer implemented method of claim 1, wherein said calculating comprises mathematical averaging.
  - 69. The computer implemented method of claim 68, wherein said mathematical averaging is performed on at least one of:
    - a 1-year period, a 3-year period, a 4-year period, a 3-5 year period, a 5-year period, a 6-year period, a 7-year period, a 8-year period or a 9-year period.
  - 70. The computer implemented method of claim 68, wherein said mathematical averaging is performed on a period less than a quarter.
  - 71. The computer implemented method of claim 68, wherein said mathematical averaging is performed on a period equal to, or greater than a quarter.
  - 72. The computer implemented method of claim 68, wherein said mathematical averaging is independent of at least a current quarter.
  - 73. The computer implemented method of claim 68, wherein said mathematical averaging is performed so as to reduce price correlation.
  - 74. The computer implemented method of claim 68, further comprising eliminating another subset (AS) of said entities based on at least one of an illiquidity or a liquidity measure.
  - 75. The computer implemented method of claim 1, further comprising using a statistical technique to at least one:
    - of mimic or substantially mirror a performance of the index.
  - 76. The computer implemented method of claim 1, wherein said plurality of entities comprises substantially all entities having publicly available periodic financial reports.
  - 77. The computer implemented method of claim 1, wherein said financial objects are held by, or on behalf of, one or a plurality of investors.
  - 78. The computer implemented method of claim 1, wherein the index construction method is performed based on at least one of:
    - (i) a current fundamental accounting measure, (ii) a past fundamental accounting measure, (iii) a forecasted fundamental accounting measure, or (iv) a mathematical blend of at least two of said (i) through said (iii).
  - 79. The computer implemented method of claim 1, wherein the index construction method is performed based on taking a mathematical transformation of at least one of:
    - (i) a current fundamental accounting measure, (ii) a past fundamental accounting measure, (iii) a forecasted fundamental accounting measure, (iv) a ratio of at least one of current, past, or forecasted fundamental accounting measures;
      
      or (v) a mathematical blend of at least two of said (i) through said (iv).
  - 80. The computer implemented method of claim 79, wherein the mathematical transformation comprises calculating a square root of at least one of said fundamental accounting measures.
  - 81. The computer implemented method of claim 1, wherein said objective measure of scale comprises at least one of:
    - reported profits of a said entity associated with a said asset;
      
      reported pre-exceptional profits of a said entity associated with a said asset;
      
      value of an expected cash flow of a said entity associated with a said asset;
      
      or value of expected measure of scale of a said entity associated with a said asset.
  - 82. The computer implemented method of claim 1, wherein said objective measure of scale comprises at least one of:
    - reported profits of a said entity associated with a said asset;
      
      reported pre-exceptional profits of a said entity associated with a said asset;
      
      a value of an expected cash flow of a said entity associated with a said asset;
      
      a value of expected measure of scale of a said entity associated with a said asset;
      
      a forecasted earning of a said entity associated with a said asset;
      
      a forecasted dividend of a said entity associated with a said asset;
      
      a forecasted sales of a said entity associated with a said asset;
      
      a forecasted revenue of a said entity associated with a said asset;
      
      a forecasted cashflow of a said entity associated with a said asset;
      
      a forecasted cumulative retained cashflow of a said entity associated with a said asset;
      
      a forecasted distribution of a said entity to a holder of a said asset;
      
      a forecasted buyback associated with a said asset;
      
      a forecasted metric of a said entity associated with a said asset;
      
      or a forecasted fundamental accounting measure of a said entity associated with a said asset.

20. The method of 1 wherein the index construction method further comprises:
- selecting by the at least one processor a universe (U) of entities based on any measure of size of said entities;
  
  selecting by the at least one processor a subset (SU) of said universe comprisingselecting said entities of the subset of said universe based on at least one of;
  
  said at least one objective measure of scale, at least one other objective measure of scale, or at least one additional objective measure of scale comprising a measure of the size of each said entity associated with each said given financial security, and wherein said measure of the size of each said entity corresponding to each said financial security comprises at least one of;
  
  gross revenue of a said entity associated with a said financial security,sales of a said entity associated with a said financial security,debt to equity adjusted sales of a said entity,earnings of a said entity associated with a said financial security,income of a said entity associated with a said financial security,earnings before interest and tax (EBIT) of a said entity associated with a said financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with a said financial security,number of employees of a said entity associated with a said financial security,book value of a said entity associated with a said financial security,cumulative retained cashflow of a said entity,assets of a said entity associated with a said financial security,liabilities of a said entity associated with a said financial security,net worth of a said entity associated with a said financial security,cashflow of a said entity associated with a said financial security,any dividends of a said entity associated with a said financial security,any distribution to financial security holders by a said entity;
  
  any financial security buybacks by a said entity;
  
  an attribute relating to employees of a said entity associated with a said financial security,an attribute relating to floor space of a said entity associated with a said financial security,an attribute relating to office space of a said entity associated with a said financial security,an attribute relating to location of a said entity associated with a said financial security,a demographic measure (DM) of a said entity associated with a said financial security,any other non-price measure of size of a said entity associated with a said financial security, ora measure relating to a demographic attribute of a said entity associated with a said financial security.
- View Dependent Claims (21, 22, 23, 24, 25, 26, 27, 28, 30, 31, 32, 33)
- - 21. The computer implemented method of claim 20, wherein at least one of the universe or the subset of the universe comprises at least one of:
    - a sector;
      
      a market;
      
      a market sector;
      
      an industry sector;
      
      a geographic sector;
      
      an international sector;
      
      a sub-industry sector;
      
      a government issue;
      
      ora tax exempt financial object.
  - 22. The computer implemented method of claim 20, wherein said plurality of entities comprising said universe is selected from a group comprising all publicly traded companies.
  - 23. The computer implemented method of claim 20, wherein said plurality of entities comprising said subset comprises all publicly traded companies.
  - 24. The computer implemented method of claim 20, further comprising:
    - selecting a subset (SSU) of said subset based on any measure of size of said entities.
  - 25. The computer implemented method of claim 20, further comprising:
    - selecting another subset (SSU) of said subset based on at least one of;
      
      a growth based measure;
      
      a value based measure;
      
      a large capitalization based measure;
      
      a small capitalization based measure;
      
      a mid capitalization based measure;
      
      a high price to earnings ratio based measure;
      
      or a low price to earnings ratio based measure.
  - 26. The computer implemented method of claim 20, comprising partitioning of said subset to generate one or more partitioned subsets.
  - 27. The computer implemented method of claim 20, comprising partitioning of the index into a plurality of partitioned sub-indexes, and wherein said portfolio is based on at least one of said plurality of partitioned sub-indexes.
  - 28. The computer implemented method of claim 27, wherein said partitioning is based on any criterion.
  - 30. The computer implemented method of claim 20, wherein selecting comprises eliminating from the universe a secondary subset (SSU) of any of said entities.
  - 31. The computer implemented method of claim 30, wherein said calculating comprises calculating weights of the remaining entities left after said eliminating.
  - 32. The computer implemented method of claim 31, wherein said eliminating comprises eliminating based on one of an illiquidity measure or a liquidity measure of the financial securities of the eliminated entities.
  - 33. The computer implemented method of claim 20, wherein each of said financial securities comprise at least one of:
    - a liability;
      
      a tracking portfolio;
      
      a financial instrument or a security, wherein said financial instrument or said security denotes a debt, an equity interest, or a hybrid;
      
      a derivatives contract, including at least one of;
      
      a future, a forward, a put, a call, an option, a swap, or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability;
      
      a commodity;
      
      a financial position;
      
      a currency position;
      
      a trust, a real estate investment trust (REIT),a real estate operating company (REOC), or a portfolio of trusts;
      
      a debt instrument comprising at least one of;
      
      a bond, a debenture, a subordinated debenture, a mortgage bond, a collateral trust bond, a convertible bond, an income bond, a guaranteed bond, a serial bond, a deep discount bond, a zero coupon bond, a variable rate bond, a deferred interest bond, a commercial paper, a government security, a certificate of deposit, a Eurobond, a corporate bond, a government bond, a municipal bond, a treasury-bill, a treasury bond, a foreign bond, an emerging market bond, a high yield bond, a developed market bond, a junk bond, a collateralized instrument, an exchange traded note (ETN), or other agreements between a borrower and a lender;
      
      a fund;
      
      oran investment entity or account of any kind, including an interest in, or rights relating to;
      
      a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, or any other pooled or separately managed investments.

83. A computer implemented method for trading a plurality of financial securities, the method performed by at least one processor configured to perform the method, the method comprising enabling the at least one processor to perform:
- (A) selecting by the at least one processor a portfolio of financial securities for trading according to an index of financial securities; and
  
  (B) trading by the at least one processor one or more financial securities of said portfolio of financial securities, based on the index of financial securities, the index of financial securities constructed based on a method of constructing the index of financial securities configured to be performed by at least one processor, the method of constructing the index of financial securities comprising enabling the at least one processor to perform;
  
  (a) gathering data by the at least one processor about the plurality of financial securities;
  
  (b) selecting by the at least one processor a plurality of the assets to create the index of financial securities based upon at least one objective measure of scale about one or more entities associated with the financial securities,wherein said selecting is substantially independent of a market price of the financial securities and a market capitalization of said entities,wherein said at least one objective measure of scale comprises a measure of the size of each said entity associated with each said given financial security, andwherein said measure of the size of each said entity corresponding to each said financial security comprises at least one of;
  
  gross revenue of a said entity associated with a said financial security,sales of a said entity associated with a said financial security,debt to equity adjusted sales of a said entity associated with a said financial security,earnings of a said entity associated with a said financial security,income of a said entity associated with a said financial security,earnings before interest and tax (EBIT) of a said entity associated with a said financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with a said financial security,number of employees of a said entity associated with a said financial security,book value of a said entity associated with a said financial security,cumulative retained cashflow of a said entity,assets of a said entity associated with a said financial security,liabilities of a said entity associated with a said financial security,net worth of a said entity associated with a said financial security,cashflow of a said entity associated with a said financial security,any dividends of a said entity associated with a said financial security,any distribution to asset holders by a said entity,any financial security buybacks by a said entity,an attribute relating to employees of a said entity associated with a said financial security,an attribute relating to floor space of a said entity associated with a said financial security,an attribute relating to office space of a said entity associated with a said financial security,an attribute relating to location of a said entity associated with a said financial security,a demographic measure (DM) of a said entity associated with a said financial security, ora measure relating to a demographic attribute of a said entity associated with a said financial security; and
  
  (c) weighting by the at least one processor the constituent assets of the index of financial security to obtain constituent weightings based on at least one objective measure of scale regarding the entities associated with the financial security,wherein said at least one objective measure of scale comprises a measure of the size of each said entity associated with each said financial security, andwherein said measure of the size of each said entity corresponding to each said financial security comprises at least one of;
  
  gross revenue of a said entity associated with a said financial security,sales of a said entity associated with a said financial security,debt to equity adjusted sales of a said entity associated with a said financial security,earnings of a said entity associated with a said financial security,income of a said entity associated with a said financial security,earnings before interest and tax (EBIT) of a said entity associated with a said financial security,earnings before interest, taxes, depreciation and amortization (EBITDA) of a said entity associated with a said financial security,number of employees of a said entity associated with a said financial security,book value of a said entity associated with a said financial security,cumulative retained cashflow of a said entity,assets of a said entity associated with a said financial security,liabilities of a said entity associated with a said financial security,net worth of a said entity associated with a said financial security,cashflow of a said entity associated with a said financial security,any dividends of a said entity associated with a said financial security,any distribution to financial security holders by a said entity,any financial security buybacks by a said entity,an attribute relating to employees of a said entity associated with a said financial security,an attribute relating to floor space of a said entity associated with a said financial security,an attribute relating to office space of a said entity associated with a said financial security,an attribute relating to location of a said entity associated with a said financial security,a demographic measure (DM) of a said entity associated with a said financial security, ora measure relating to a demographic attribute of a said entity associated with a said financial security; and
  
  (i) wherein the weighting is substantially independent of the market price of the financial securities and a market capitalization of said entities; and
  
  (ii) wherein the weighting is substantially independent of;
  
  equal weighting;
  
  weighting in proportion to the market price of the financial securities; and
  
  weighting in proportion to market capitalization of the entities associated with the financial securities.
- View Dependent Claims (84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97)
- - 84. The computer implemented method of claim 83, wherein the portfolio of financial securities comprises at least one of:
    - a fund (F);
      
      a mutual fund (MF);
      
      a fund of funds (FF);
      
      an financial security account;
      
      an exchange traded fund (ETF);
      
      a separate account;
      
      a comingled account;
      
      a pooled trust;
      
      a limited liability company;
      
      ora limited partnership.
  - 85. The computer implemented method according to claim 84, wherein said method further comprises:
    - rebalancing the portfolio of financial securities based on the index of financial securities.
  - 86. The method of claim 83, wherein said financial securities comprises:
    - at least one unit of interest in at least one of;
      
      an asset;
      
      a liability;
      
      a tracking portfolio;
      
      a financial instrument or a security, wherein said financial instrument or said security denotes at least one of a debt, an equity interest, or a hybrid;
      
      a derivatives contract, including at least one of;
      
      a future, a forward, a put, a call, an option, a swap, or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability;
      
      a fund;
      
      oran investment entity or account of any kind, including an interest in, or rights relating to at least one of;
      
      a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, or any other pooled or separately managed investments.
  - 87. The computer implemented method according to claim 83 wherein the index of financial securities comprises an accounting data index (ADI), the method comprising:
    - a) receiving, by at least one processor, the ADI from an index provider, wherein the index provider previously constructed the ADI and stored the ADI on at least one analysis host processor,the at least one analysis host processor of the index provider comprising at least one processor,at least one of the at least one processors adapted to access by the at least one analysis host processor one or more databases storing and permitting retrieval of data about a plurality of entities and a plurality of corresponding financial securities each issued by or having been issued by at least one of the plurality of entities;
      
      at least one of the at least one processors adapted to receive by the at least one analysis host processor the at least one measure of scale regarding one or more of the plurality of financial securities or one or more of the plurality of the entities associated with the corresponding financial securities;
      
      at least one of the at least one processors adapted to retrieve by the at least one analysis host processor one or more of the data about the plurality of the entities and the corresponding financial securities;
      
      at least one of the at least one processors adapted to receive a universe of the financial securities;
      
      at least one of the at least one processors adapted to select a subset of the universe of the financial securities based on any measure of scale of the entities of the financial objects to obtain a subset of the universe;
      
      at least one of the at least one processors adapted to select a plurality of financial securities of the subset based upon at least one accounting data related to the entities of the financial object to obtain a plurality of constituent index assets of the ADI; and
      
      at least one of the at least one processors adapted to weight said plurality of financial securities based upon at least one accounting data related to the entities of the financial securities to obtain a plurality of constituent weightings of the financial securities of the ADI; and
      
      b) purchasing, by the at least one processor, a portfolio of financial securities by at least one trading host comprising at least one processor, said portfolio of financial securities comprising the plurality of constituent assets of the ADI in proportion to the constituent weights of the ADI received.
  - 88. The method according to claim 87, further comprising:
    - c) altering, by the at least one processor based on user input, said portfolio of financial securities by said at least one trading host comprising said at least one processor, when the ADI received from the index provider changes over time, said altering comprising at least one of;
      
      i) purchasing by said at least one trading host at least one of;
      
      constituent financial securities of the ADBI, or any new constituent financial securities of the ADI over time;
      
      ii) purchasing by said at least one trading host any additional constituent financial securities based on changes in the constituent weights of the constituent financial securities making up the ADI over time;
      
      iii) selling by said at least one trading host any previous constituent financial securities no longer components of the ADI over time;
      
      oriv) selling by said at least one trading host any previous constituent financial securities necessitated by changes in the calculated weights of the constituent financial securities over time.
  - 89. The method of claim 83, wherein the method of constructing the index is performed by at least one of:
    - an index designer, an index calculator, or an index provider.
  - 90. The method of claim 83, wherein the method of trading is performed by at least one of:
    - a portfolio provider, an index calculator, or an index provider.
  - 91. The method of claim 83, wherein the method of constructing the index is performed in advance of said method of trading.
  - 92. The method of claim 83, wherein the method of constructing the index is performed periodically, and the method of trading is performed as the constituents and the weightings of the index of financial securities changes over time.
  - 93. The method of claim 83, wherein the method of trading comprises trading based on rebalancing the portfolio of financial securities over time.
  - 94. The method of claim 83, wherein the method of constructing the index comprises rebalancing the index of financial securities over time.
  - 95. The method of claim 83, wherein said ranking comprises determining whether a given financial security should be included in the index.
  - 96. The method of claim 83, wherein said ranking comprises ordering by a value of said at least one objective measure of scale.
  - 97. The method according to claim 83, wherein said trading based on the index comprises:
    - receiving, by at least one processor, the index and considering the index as a universe of financial securities;
      
      determining, by the at least one processor, a subset of the universe of the financial securities based on any measure of scale of the entities of the financial objects to obtain said subset of financial securities of the universe of financial securities; and
      
      trading based on said subset of financial objects.

Specification

Resources

Litigation Campaign Assessment

Current Assignee
Research Affiliates LLC (Research Affiliates Global Holdings LLC)
Original Assignee
Research Affiliates LLC (Research Affiliates Global Holdings LLC)
Inventors
Arnott, Robert D., Wood, Paul Christopher
Primary Examiner(s)
JOHNSON, GREGORY L

Application Number

US12/619,668
Publication Number

US 20100287116A1
Time in Patent Office

1,184 Days
Field of Search

705/36.R, 705/35
US Class Current

705/36.R
CPC Class Codes

G06Q 30/02 Marketing; Price estimation...

G06Q 40/06 Asset management; Financial...

Non-capitalization weighted indexing system, method and computer program product

First Claim

1 Assignment

0 Petitions

Accused Products

Abstract

369 Citations

97 Claims

Specification

Solutions

Use Cases

Quick Links

Non-capitalization weighted indexing system, method and computer program product

First Claim

1 Assignment

Subscription Required

Subscription Required

0 Petitions

Subscription Required

Accused Products

Subscription Required

Abstract

369 Citations

97 Claims

Specification

Subscription Required

Solutions

Use Cases

Quick Links