Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Reexamination Certificate
1999-04-23
2003-01-21
Stamber, Eric W. (Department: 2162)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
C705S035000, C705S037000, C705S001100
Reexamination Certificate
active
06510419
ABSTRACT:
FIELD OF THE INVENTION
The invention relates to a system and methods for managing and viewing historical security analyst data; for measuring, analyzing, and tracking the historical performance of security analysts' estimates and buy/sell recommendations; and using such performance and other information to automatically produce better predictors of future corporate earnings or stock-price performance.
BACKGROUND OF THE INVENTION
There are many individuals who analyze financial data and financial instruments, such as equity and fixed-income securities. At least some of these individuals analyze such data in an attempt to predict future economic events. Such individuals may include, for example, security analysts and may be known as contributors or analysts, among others. The role of the security analyst is generally well-known and includes, among other things, the issuance of earnings or other financial estimates concerning future economic events and recommendations on whether investors should buy, sell, or hold financial instruments, such as equity securities. Security analyst estimates may include, but are not limited to, quarterly and annual earnings estimates for companies, whether or not they are traded on a public securities exchange.
At least some investors tend to rely on the earnings estimates and recommendations issued by security analysts. Usually more than one analyst follows a given equity security. Analysts often disagree on their earnings estimates and recommendations and, as a result, analysts' earnings estimates and recommendations may sometimes vary.
A number of financial information services providers (FISPs) gather and report analysts' earnings estimates and recommendations. At least some FISPs report the high, low, and mean earnings estimates, as well as mean recommendations for equity securities (as translated to a FISP's particular scale, for example, one to five). In addition, FISPs may also provide information on what the earnings estimates and recommendations were seven and thirty days prior to the most current consensus, as well as the differences between the consensus for a single equity security and that of the relevant industry. Moreover, for some clients, FISPs provide earnings estimates and recommendations on an analysts-by-analyst basis. An advantage of the availability of analyst-level estimates and recommendations is that a client can view the components of the mean estimate or recommendation by analyst. Various drawbacks exist, however, with these approaches and other known techniques.
For example, prior approaches include a software program that displays all current estimates. For a particular fiscal period for a particular security the software provides the ability to simply “include” or “exclude” each estimate (recommendation) from the mean. This is problematic for several reasons. First, commercially available databases of estimates and recommendations contain “current” data on thousands of stocks. Each stock may have estimates from 1 to 70 or more analysts. Each analyst may provide estimates for 1 to many periods. The data may be updated throughout the day. Manually dealing with this volume of information can be time consuming.
A second drawback is that with current techniques, if someone were inclined to determine which estimates (recommendations) should get more weight, and which estimates should get less or no weight, the sheer volume of analysts (over 3,000 for U.S. stocks alone) makes it extremely difficult to know which analysts provide more useful information than others. Current techniques lack sufficient ability to intelligently measure historical analyst performance and beneficially use such measurements.
A third drawback is that it while it is possible to imagine various weighting systems or algorithms, it is difficult to effectively implement or test them. Current systems do not provide the ability to effectively devise new estimate (recommendation) weighting algorithms; nor do they provide the ability to easily test their (hypothetical) historical performance.
A fourth drawback with current techniques is that there are limited or no tools for effectively viewing historical estimates and recommendations as time-series graphs or for overlaying this information over a graph of prices for the securities to understand the relationship between changes in estimates (recommendations) to changes in securities prices. These and other drawbacks exist with existing systems
SUMMARY OF THE INVENTION
An object of the invention is to overcome these and other drawbacks of prior approaches and techniques.
Another object of the invention is to measure and use the historical performance of an analyst's past estimates or recommendations to better predict future earnings or effectively use analysts' recommendations.
Another object of the invention is to provide a tool to automatically create more accurate composite estimates (predictors) by adjusting one or more analyst's estimates up (down) if they have a historical tendency to under (over) estimate the value of future quantities such as earnings.
Another object of the invention is to automatically create an improved composite estimate for one or more securities by calculating a weighting factor for each analyst's estimate that gives relatively more weight to certain analyst estimates and relatively less or no weight to other analyst estimates, where the weighting factor is based upon predetermined criteria.
Another object of the invention is to objectively measure the historical accuracy of the estimates made by one or more Contributors (analysts and/or brokers)
Another object of the invention is to provide a tool to measure historical accuracy of predictions with the flexibility for the user to specify one or more of the time frame of estimates to be measured (e.g., those estimates 9-12 months prior to actual report date), the number of periods over which to aggregate performance, the error metric used to calculate performance, and the stocks over which to aggregate performance.
Another object of the invention is to exclude from calculation of an automatically generated composite all estimates (recommendations) that do or do not meet certain criteria.
Another object of the invention is to provide a tool to automatically identify a cluster, or major revision of estimates (or recommendations), based upon predetermined criteria
Another object of the invention is to automatically create a composite estimate (or recommendation) by excluding (or assigning reduced weight) to those estimates received prior to the beginning of a cluster.
Another object of the invention is to automatically calculate an improved composite estimate or recommendation by both adjusting estimates of earnings by calculating an earnings estimate based upon the adjustment and weighting factors for a plurality of analysts' estimates.
Another object of the invention is to measure the historical performance of a single or plurality of analysts' estimates and to measure the historical profitability of recommendations of either a single or plurality of analysts.
Another object of the invention is to compare the performance of analysts' estimates and recommendations for a particular financial instrument or industry.
Another object of the invention is to enable a user to define the method for measuring the performance of an analyst by allowing for the specification of a number of security analyst performance parameters or metrics.
Another object of the invention is to allow for the creation, storage, and recall of security autoweight models and related estimates where the models automatically assign weights to each analyst's estimate or recommendation based on stored, user-defined criteria.
Another object of the invention is to test autoweight models by applying predetermined criteria.
Another object of the invention is to provide a data visualization technique to allow a user to display simultaneously the estimates of earnings (or other quantities such as revenues) for a si
Alvarez Raquel
Mintz Levin Cohn Ferris Glovsky and Popeo P.C.
Stamber Eric W.
Starmine Corporation
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