METHOD FOR SELECTING EQUITY INVESTMENTS USING QUANTITATIVE MULTI-FACTOR MODELS OF THE RELATIONSHIP BETWEEN COMMON BUSINESS CHARACTERISTICS AND CURRENT STOCK PRICES

摘要

The present invention provides a novel method for evaluating investment instruments using an objective actor based methodology for assessing such factors independent contribution to profits which includes the steps of: supplying, for the plurality of said businesses, datasets of historical reported corporate profits and datasets of said historical business characteristics (factors) correlated to said corporate profits; calculating, for each of said factors and for each historical period in the dataset, a weighting value for each of said businesses representing the relationship between the business and the factor; for each historical period in the dataset, applying a regression analysis to the plurality of weighting values for the plurality of factors and the reported profits for the plurality of businesses to determine the reported profits attributable to each of said factors; and calculating a profit forecast for each of said factors.

主权项

1. A method for predicting the contribution to the profits of each of a plurality of businesses from each of a plurality of common business characteristics comprising the steps of:
a. Supplying, for the plurality of said businesses, datasets of historical reported corporate profits and datasets of said historical business characteristics (factors) correlated to said corporate profits. b. Calculating, for each of said factors and for each historical period in the dataset, a weighting value for each of said businesses representing the relationship between the business and the factor. c. For each historical period in the dataset, applying a regression analysis to the plurality of weighting values for the plurality of factors and the reported profits for the plurality of businesses to determine the reported profits attributable to each of said factors. d. Calculating a profit forecast for each of said factors comprised of 1) a weighted average of actual profits for said profit source, 2) the variation around the forecast, and 3) the covariance between said factor and all other factors. e. For each of the plurality of businesses, calculating the profit forecast by scaling the profit forecasts of each of the plurality of factors by the weighting values of the business with respect to each of said factors.