the internet as the ultimate security analyst's tool

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The Internet As The Ultimate The Internet As The Ultimate Securities Analyst’s ToolSecurities Analyst’s Tool

Instructor: John M. Longo, Ph.D., CFAPortfolio Manager: Cyborg Long / Short Fund, LPMember of Finance Dept., Rutgers Business SchoolInvestment Strategist: The MDE Group

New York Society of Security Analysts

Investment Research Challenge

September 24, 2003

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DisclaimerDisclaimer

NYSSA and Cyborg Capital Management, LLC have no affiliation with any of the websites discussed herein. All copyrights and trademarks are the property of their respective owners.

New York Society of Security Analysts, (NYSSA) and Cyborg Capital Management, LLC. All rights reserved.

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Implications of the Internet for Security Implications of the Internet for Security Analysis and Investment ManagementAnalysis and Investment Management

Harness the collective wisdom of millions of people working for free.

Content (e.g. news, articles, analytics, etc.) that was once very costly is now available for free.

Playing field between institutional and retail investors is leveled to a greater extent than ever before given the ubiquitous and instantaneous flow of information and Regulation FD. Therefore, an innovative approach to research is at a premium (especially with traditional Wall Street “research” under fire.)

It is important to distinguish between fact and opinion given the unknown motives of many in the Internet community.

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Presentation Overview: Presentation Overview: Bottom Up ApproachBottom Up Approach

I: Introduction (p.5)II: Firm Specific Information (p. 6)III: Industry / Sector Information (p. 40)IV: Portfolio Management / Macro Information

(p.47)V: Performance Evaluation / Benchmark Risk Of

Portfolios (p. 70)VI: Compliance / Ethics (p. 74)VII: Education (p. 75)

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I. IntroductionI. Introduction

(Briefly visit these sites as an introduction to the types of things the class will discuss.)

www.Smartmoney.com/marketmap/ (SmartMoney.com MarketMap) http://screening.nasdaq.com/Heatmaps/Heatmap_100.asp

(Nasdaq 100 Heatmap)finance.yahoo.com (Yahoo! Finance - give a quick overview)

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II. Firm Specific InformationII. Firm Specific Information

Advanced Valuation Techniques

www.stern.nyu.edu/~adamodar/New_Home_Page/

Security Analysis / Valuation e-Text (Prof. Aswath Damodaran website for valuation / security analysis)

www.stanford.edu/~wfsharpe/

Portfolio Management e-Text (Prof. William Sharpe website for portfolio management / macro analysis)

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Advanced Valuation TechniquesAdvanced Valuation Techniques

Q: Why is this topic important?A: Earnings and price forecasts should have a rigorous

underlying basis. No one model works all the time, so analysts should be familiar with the work produced by some of the leading thinkers in the world of Finance. It may be appropriate to use a rigorous earnings / price valuation model as a starting point and to use additional information to increase or decrease these estimates. Some of this “softer” information may include management guidance, channel checks, competitor information etc.

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Basic Valuation TechniquesBasic Valuation Techniques

www.quicken.com/investments/stocks/

(Enter Symbol then click “Evaluator” then click “Intrinsic Value”)

www.DividendDiscountModel.com

Moneycentral.msn.com/investor/home.asp (Part pay site. Enter Symbol, click “Go”)

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Basic Valuation TechniquesBasic Valuation Techniques

Q: Why is this topic important?

A: Some analysts may not have the time or philosophically disagree with the comprehensive valuation models recommended by the academics. These simple financial models can give the analyst a quick estimate of the value of a stock while toying with “what if” assumptions.

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Earnings WhispersEarnings Whispers

www.EarningsWhispers.com

www.WhisperNumber.com

www.TheWhisperNumber.com (pay site)


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A: Historically, the vast majority of companies (e.g. Microsoft) met or exceeded earnings expectations (the current market environment is an exception). Companies would provide analysts with guidance they could meet or beat and analysts’ published forecasts often fell in line with this guidance. If analysts felt that the consensus earnings number was too high or low they would often call their best institutional clients and inform them of this unpublished guidance (hence the term whisper). Internet sites, such as those above, sprung up to provide “whisper” information to the public en masse.

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Q: Where do the “whisper” numbers come from?A: Some of the estimates are statistically estimated

from past earnings history while others are of a “softer” nature and rely more prominently on personal contacts. Studies (see websites for details) have found that the whisper numbers are more accurate than the published consensus numbers. Many traders use whisper numbers, therefore they have the potential to dramatically affect security prices.

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Earnings HistoryEarnings History

www.SmartMoney.com/stocks/

(Enter Symbol then click “Earnings” link)

finance.yahoo.com

(Enter Symbol then click “Research” link)

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Earnings HistoryEarnings History


A: There is a large literature on the persistence of earnings momentum. That is, a firm that historically beats earnings expectations is likely to do so in the future. Most studies find that earnings momentum strategies (note: this is distinct from price momentum) earn excess returns. Good management knows how to manage market expectations and under-promise and over-deliver.

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Earnings RevisionsEarnings Revisions

Earnings Revisionswww.ThomsonInvest.net/FirstCall/estimate.sht Q: Why is this topic important?A: Many professional investors have buy (sell)

triggers on earnings increases (decreases). The basic idea is that analysts display herding behavior, so if one analyst raises her estimates the others are likely to follow.

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Conference CallsConference Calls

www.bestcalls.com (pay site)- (Yahoo! Finance and company websites also list selected

calls for free.) Q: Why is this topic important?A: The market is a forward-looking mechanism and, in

many cases, the future outlook of a firm may be more important than the reported numbers. Press releases often quote management in a dry and superficial way, largely due to legal liability concerns… (continued on next slide)

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Conference CallsConference Calls

Q: Why is this topic important? (continued)

A: … However, listening to the calls sometimes enables one to glean the “body English” of management’s perception of the past, present, and future. Indeed, with Regulation FD firmly in place, the conference call is one of the few opportunities for management to make any substantial comments, without much concern of running astray of SEC guidelines.

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Patent InformationPatent Information

www.patentcafe.com/

www.delphion.com/ (Backed by IBM)


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Patent InformationPatent Information

A: In many industries (notably Technology and Medicine) intellectual property often dominates book value (e.g. Qualcom, Rambus, Celera, etc). Although a firm grasp of patents and their implications may be beyond the core competence of some analysts, it may be important to at least have the understanding required to ask good questions.

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Accounting InformationAccounting Information

www.sec.gov/foia.shtml (SEC Freedom of Information Act. Get information on SEC investigations.) [The rest are pay sites]

www.EarningsQuality.com (Earnings quality analytics)

www.StockDiagnostics.com ( Another earnings quality site. Part free, part pay.)

www.cfraOnline.com (Institutional research site of Financial Shenanigans author Howard Schilit.)

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Accounting InformationAccounting Information


A: The developments related to Enron, Tyco, WorldCom, Adelphia, etc. have increased the importance of conducting an unbiased analysis of complicated financial statements. Unfortunately, there are no (or very few) free websites that rigorously examine earnings quality. S&P sells “Core Earnings” information as part of their Compustat and Research Insight databases.

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Message BoardsMessage Boards

finance.yahoo.com www.RagingBull.com www.SiliconInvestor.com www.ValueInvestorsClub.com See Tumarkin and Whitelaw article “News

or Noise? Internet Postings And Stock Prices ” Financial Analysts Journal, May/June 2001, pp.41-51.

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Message BoardsMessage Boards

Q: Why is this topic important?A: The millions of posters know more than you do in many

areas. Although much of the posting is “spam” and irrelevant, there are enough quality posts to make an occasional or regular viewing of the boards a worthwhile endeavor. The message board can often be a source of information when a security is moving dramatically without any published news. It is important to distinguish between fact and opinion / rumor when reading any messages, especially given the unknown motives of most of the posters.

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Example Of An Informative Factual Post Example Of An Informative Factual Post (from the Yahoo! CheckFree Message Board)(from the Yahoo! CheckFree Message Board)

Re: CKFR - Likely to go higherby: limentinus 07/02/02 07:39 pm Msg: 21189 of 21217

Although CheckFree's rate of growth has been certainly slowing, it has never grown by less than 10% annually, something very few companies its size can claim these days; not even Microsoft, IBM, or GE have grown faster.

Going to a transaction model is something CheckFree has indicated for years it was happy to do, provided that it received a large enough minimum to cover its fixed costs. When a company has by far the largest volume of payments, a transaction model ensures that no competitor will be able to match its incremental pricing while providing comparable quality. This advantage is particularly telling when a customer, like Wells Fargo, is choosing the processor on the basis of the cost of the next transaction.

It should also be remembered that CheckFree is largely paid by banks, not consumers, and that banks are willing to subsidize the cost to an extent that is commensurate with the benefits the bank derives from enhanced customer loyalty, a calculation that has little to do with the price of postage. Moreover, the "buck a transaction" analysis fails to consider the revenue the company receives from other sources, including from electronic billers.

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Example of an informative opinion / rumor post Example of an informative opinion / rumor post (from the Yahoo! AMD Message Board)(from the Yahoo! AMD Message Board)

DELL will announce alliance with AMD!by: andreasmur Long-Term Sentiment: Strong Buy

Before 21 July! I am a worker in AMD in Dresden!

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Proceed With Caution When Proceed With Caution When Posting SpeculationPosting Speculation

Re: RUMORS: NTAP PROFIT WARNING -1/-2CTSby: goodbystock

07/11/01 07:16 amMsg: 85343 of 85647

I am an employee of NTAP, our CEO, Daniel, told me two days ago that our earnings will be 2 - 3 cents better than expected (2 cents) because we have many big orders this QT.

Just let you know.

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Not All Posters Wish You WellNot All Posters Wish You Well

Dear Employee of NTAP 07/11/01 08:33 am

by: drbychoice (51/M) Msg: 85351 of 85647

Long-Term Sentiment: Strong Sell

goodbystock --- > you just posted "truth" ??? If not, impersonating an employee of a stock on a public accessed board is illegal. Ask the many dozens that were caught by the FBI. I know better than to believe 2% of what is posted, however; I just thought I'd forewarn you that I emailed your info on to Yahoo, the SEC, & NTAP's PR. Even IF it were true, you have no place making statements like that. FYI, attempting to delete your identity from YAHOO doesn't help your case. They are aware of exactly where you live.

Have a great day or few years in your future home...I hear they have cable internet connection in the pen now? :)

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Interesting Thread Interesting Thread Based on Based on The Gorilla GameThe Gorilla Game by Geoffrey Moore by Geoffrey Moore

Tries to identify present and future Technology “gorillas” (e.g. Microsoft)

www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=25851

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Caveat: Occasional FraudCaveat: Occasional Fraud

PairGain false “Bloomberg” news release posted on Yahoo! message board. Poster convicted of criminal activity.

James Cramer and others lost money trading on this story.

Other companies have sued posters for inaccurate comments.

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Institutional Indications of Trading InterestInstitutional Indications of Trading Interest

iw.thomsonfn.com/iwatch/cgi-bin/iw_overview

(Thompson I-Watch) Q: Why is this topic important?A: Institutions are responsible for the majority of the

trading volume. Retail investors are often influenced by the investment advice of fund managers / analysts. (This information is often disseminated to retail investors via the media or financial consultants / brokers).

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Technical AnalysisTechnical Analysis

www.clearstation.comwww.wallstreetcity.com Q: Why is this topic important?A: The shorter the investment horizon, the more

important technical analysis becomes. The longer the horizon, the more important fundamental or earnings based analysis becomes. Most daytraders ignore the fundamentals and focus only on technical variables.

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Short Selling IdeasShort Selling Ideas

www.asensio.com/

(well-known short seller disclosing some of his positions)

www.PrudentBear.com/ (see Bear Library)

www.SecuritiesSleuth.com/

(Site that attempts to uncover fraud)

www.hacketts.net (long & short research)

www.F***edCompany.com (dot com rumors)

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Short Selling IdeasShort Selling Ideas


A: In light of the recent bear market, many investors are selling short as a hedge. In addition, most research is biased towards the positive side. It may provide one with a more balanced perspective to see what short sellers are saying about a specific stock

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Short InterestShort Interest

www.viwes.com/invest/shorts/

Q: Why is this topic important?A: Short sellers are considered to be sophisticated

investors. There is some evidence that securities with high short interest levels underperform the market in future periods. Stocks with large increases (decreases) in Short Interest may be good shorting (buying) opportunities.

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IPO Lockup ExpirationsIPO Lockup Expirations

www.edgar-online.com/ipoexpress/lockup.asp www.ipo.com/ipoinfo/lockup.asp?p=IPOQ: Why is this topic important?A: Some traders short stocks that have lock up

periods that are about to expire. This may be especially relevant for hot IPOs that are trading significantly above their offering prices. In addition, secondary offerings may also be announced after this time, perhaps adding pressure to the stock.

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Insider TradingInsider Trading

www.smartmoney.com/stocks/ (Enter Symbol then click “Insiders” link)

Q: Why is this topic important?A: Management knows more about the firm than

outsiders. Substantial buying is almost always a bullish sign since most executives have numerous stock options. Modest selling is generally not worrisome since executives may wish to diversify their portfolios. Large selling may be cause for some concern and often results in price drops once the information hits the newswires.

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Stock BuybacksStock Buybacks

www.investhelp.com/buybacks.phtml Q: Why is this topic important?A: There is some evidence that firms that initiate

buybacks generate future excess returns. The buyback signals management’s confidence in the stock, provides support for the stock price, reduces the potential manipulation of the stock by short sellers, and is accretive to earnings per share in most cases.

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General Company InformationGeneral Company Information

General Company Informationwww.hoovers.com/ (more detailed

information than Yahoo! and most other sites. Part free and part pay site.)

www.MarketGuide.com (now owned by Multex.com – some of this information is also listed on Yahoo! Finance)

[Also see company websites]

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Financial StatementsFinancial Statements

www.FreeEdgar.com (Financial Statements filed with the SEC)

www.sec.gov/edgar.shtml (SEC site) www.amex.com (see real-time filings link) www.spredgar.com (download filings into

spreadsheet)Q: Why is this topic important?A: Regulation FD and the current accounting scandals

have increased the importance of analysts reading the filings of companies and their competitors.

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III: Industry / Sector InformationIII: Industry / Sector Information

Sector Trackerwww.SmartMoney.com/SectorTracker/Q: Why is this topic important?A: Some studies find that price momentum (e.g.

Moskowitz, Journal of Finance, 1999) is driven by industry momentum. That is, it is more important to be in a Gold stock that to have the “best” Gold stock – the industry effect dominates the firm specific effect.

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Journals – Industry Specific Journals – Industry Specific (Also See Trade Publications)(Also See Trade Publications)www.nature.com

(Site with links to dozens of scientific journals)

content.nejm.org/

(The New England Journal of Medicine)

www.Cnet.com

(Tech information portal / media site)

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Journals – Industry Specific Journals – Industry Specific (Also See Trade Publications)(Also See Trade Publications)


A: Once again, with Regulation FD and traditional Wall Street research under fire, a premium is placed on original research. The popular press often picks up on things after the publication date, while a great amount of the research can be uncovered much earlier in working paper or conference paper form.

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Valuation of SectorsValuation of Sectors

www.StockVal.com/ (See current valuation metrics of a sector, relative to historical levels)

www.SmartMoney.com/stocks/ (Enter Symbol then click “Key Ratios” link)

Q: Why is this topic important?A: It can help you find the typical earnings multiple

for Technology (or other sector) stocks pre-bubble. This may be a useful guide to determining if a sector has stretched its valuation metrics to unsustainable levels.

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Example: Financial Services ResearchExample: Financial Services Research

www.BankStocks.com (Free website)(Published by Tom Brown, Hedge Fund Manager

and former Bank Analyst.)Q: Why does he publish research for free?A: “The site lets us evangelize about companies that

we like…The site lets us build relationships with mid-level employees of the companies we write about…The site lets us sound off on issues that matter to us…”

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Ex: Financial Services Research (Cont’d)Ex: Financial Services Research (Cont’d)

www.BankeRate.com Lists interest rates for various financial

products by each financial institutionQ: Why is this information relevant for

analyzing financial stocks?A: You can see how competitive a firm’s

price and also obtain an estimate of their profit margins on various products.

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IPO Map, IPO Calendar, and IPO Map, IPO Calendar, and other Informationother Informationwww.SmartMoney.com/IPOmap www.IPO.com/ www.mercerpartners.com/SYNDICATE/IPO/index.htm

www.IPOMonitor.com/ Q: Why is this topic important, especially if I don’t

trade IPOs?A: It may be useful to see what is in the pipeline and

the valuation afforded to the new firms.

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IV: Portfolio Management / IV: Portfolio Management / Macro InformationMacro Information

Brokerage Research Reports investor.cnet.com/investor/brokeragecenter (CNET brokerage center)www.multex.com (Part pay and part free site)www.clearstation.com (Enter Symbol then

select “Analyst Info” from the drop-down box)

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Brokerage Research ReportsBrokerage Research Reports

Q: Why is this topic important?A: Analyst upgrades and downgrades move

security prices. The herding behavior of analysts may result in others following suit.

Q: Do you get the whole report?A: No, they usually provide an executive

summary. In most cases it is enough to understand the key points of the full report.

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Amateur AnalysesAmateur Analyses

www.marketocracy.com (Predictions of amateur investors are ranked and highlighted)

www.ChangeWave.com (Author / Fund Manager Tobin Smith gathers “grassroots” information from (primarily Tech) working professionals.

Q: Why is this topic important?A: There is not a large difference between a good amateur

report vs. one that was written by a professional analyst. The Peter Lynch theory of “invest in what you know” applies here. These reports are probably of greater use with “unknown” small cap stocks.

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Amateur AnalysesAmateur Analyses

(See “Amateurs Take on Street In Trying to Assess Intel,” The Wall Street Journal Online, June 10, 2001. The article make the point that it is impossible to distinguish between comments written by professional analysts vs. those written by bulletin board posters.)

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Testing Analyst Track RecordsTesting Analyst Track Records (Objectively)(Objectively)

www.validea.com (see guru section)

www.StarMine.com (nice visualization tools)

www.smartmoney.com/pundits/

(see guru / pundit batting averages)

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Testing Analyst Track RecordsTesting Analyst Track Records (Objectively)(Objectively)

Q: Why is this topic important?A: In the short-run, money will follow those

analysts who appear to have the “hot hand.” In the long run, people will gravitate towards those analysts who have good long-term track records across a number of market cycles.

Caveat: Sample size is too small in many cases to

make firm conclusions, but…

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After Hours Quotes / InfoAfter Hours Quotes / Info

www.AfterHoursTrading.comwww.MidnightTrader.comwww.Island.com Q: Why is this topic important?A: Most earnings and other material announcements

are disclosed after hours (i.e., outside 9:30am – 4:00pm EST). After hours volume is usually thin, but you can trade in these stocks via ECN’s like Instinet, Island, etc. before the public en masse.

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Asset AllocationAsset Allocation

www.SmartMoney.com/OneAsset/www.FinancialEngines.com (pay site)Q: Why is this topic important?A: Asset allocation explains a large

percentage of the variation in returns, especially for large diversified portfolios. Better asset allocation decisions may lead to better long-term performance.

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Riding The Coattails of Top Managers Riding The Coattails of Top Managers (List of Fund Holdings and Performance)(List of Fund Holdings and Performance)

screen.morningstar.com/InvestmentRadar/InvestmentRadar.html (Graphical interpretation of fund manager performance)

www.freeEdgar.com (SEC filings - do a search on Fund name / symbol)www.morningstar.com (Click on Top 25 link after typing in fund name) www.bigdough.com (pay service for more timely information –

most of the free information is updated quarterly)www.nasdaq.com (click on “Holdings / Insiders” for

institutional holdings by firm, not fund) www.LionShares.com (detailed ownership information)

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Riding The Coattails of Top Managers Riding The Coattails of Top Managers (List of Fund Holdings and Performance)(List of Fund Holdings and Performance)

Q: Why is this topic important?A: There is some evidence of performance

persistence. That is, some people are consistently bad, while others are consistently good – but the average does not outperform. Of course the consistently bad performers will likely disappear in a few years, but there is always “new blood” to take their places. On the flip side, some traders sell short holdings of underperforming funds betting on a wave of redemptions.

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Economic InformationEconomic Information

http://205.232.165.149/ (Dr. Edward Yardeni’s homepage – Chief Strategist at Prudential. )

www.nber.org/ (Government sponsored research conducted by 600 leading Professors)

FairModel.econ.yale.edu/ (Yale Prof. site with emphasis on macroeconomic forecasting)

Q: Why is this topic important?A: Macroeconomic variables such as GNP and interest rates

affect earnings and the valuation of those earnings relative to other investment opportunities.

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Interest Rates / Fixed IncomeInterest Rates / Fixed Income

www.SmartMoney.com/Bonds (Select “Living Yield Curve” link)

www.CreditRiskMonitor.com (Pay site with models that try to predict financial distress / bankruptcy.)

www.bloomberg.com (Select “U.S. Treasuries” link)

www.eTrade.com (Select “Bonds” link – quotes on 7500 fixed income securities

bonds.yahoo.com (See “Bond Screener”)

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Interest Rates / Fixed Income Interest Rates / Fixed Income (Cont’d)(Cont’d)

www.DebtTraders.com (Fixed income quotes)www.ConvertBond.com (Morgan Stanley pay site

for convertible bonds.)www.BondsOnline.com (Interest rates and spreads

for the fixed income market)www.BankruptcyData.com (Website specializes in

distressed securities)www.StandardandPoors.com (Select “Credit Ratings

Lists”)

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Interest Rates / Fixed IncomeInterest Rates / Fixed Income


A: Fixed income investments are held by most individual and institutional investors. In the long run, the value of any asset is the present value of future cash flows. Interest rates are an integral component of the present value calculation. Credit risk research has also gained increase interest of late with the well publicized blowups of Enron, WorldCom, Adelphia, etc.

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Futures Quotes / InformationFutures Quotes / Information

www.FuturesWeb.com

www.pcquote.com/futures/index.php


A: The Futures Market is often a leading indicator for the spot (or cash) market.

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OptionsOptions

biz.yahoo.com/opt/www.Ivolatility.comwww.schaeffersresearch.comwww.iqauto.com/cgi-bin/pain.pl (Max pain theory)Q: Why is this topic important?A: You can get more “bang for the buck” in the

Options Markets and they (like the Futures Markets) are often leading indicators for the spot market.

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Stock Screening Stock Screening (By 80 Variables)(By 80 Variables)

www.marketguide.com/mgi/netscreen/screening.asp?rt=netscreen&rn=screening

(most other screens have far fewer variables)

www.B4Utrade.com

(pay site that filters on some unique variables such as CNBC appearances)

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Stock ScreeningStock Screening


A: There are thousands of securities that one may invest in. An investment screen reduces the universe to a manageable size. The analyst / manager may then conduct further analysis in order to select the final securities for the portfolio.

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Industry Hedging / Speculation Vehicles Industry Hedging / Speculation Vehicles (HOLDRs, iSHARES, VIPERS, SPDRs, etc.)(HOLDRs, iSHARES, VIPERS, SPDRs, etc.)

www.holdrs.com/holdrs/main/index.asp?Action=Outstanding (Quotes / Info on exchange traded funds)

www.amex.com/asp/option_index_trackers.asp Q: Why is this topic important?A: It is easier and quicker to restructure a portfolio

using indexes than it is to trade in the underlying securities. There may also be tax reasons why one would prefer an index vs. an outright sale of an existing position.

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Corporate Governance and Corporate Governance and Proxy VotingProxy Votingwww.domini.com/ProxyVoting.html (Domini Social Investments is the first mutual fund

company to disclose all of its proxy votes)www.calpers-governance.org/alert/proxy/ (free access to over 300 proxy voting decisions with

appropriate justification)www.paxfund.com/proxyvote.htm (Pax World group of mutual funds discloses voting

record online)

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Corporate Governance and Corporate Governance and Proxy Voting (continued)Proxy Voting (continued)

iss.cda.com (Institutional Shareholder Services - pay site with

voting recommendations on 20,000 companies)www.theproxymonitor.com (pay site with voting recommendations on 20,000

companies worldwide)www.SocialFunds.com (personal finance for social investors) www.CorpGov.net (Corp. governance focused site)

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Proxy VotingProxy Voting


A: Corporate governance issues have gained increasing attention in the wake of Enron, Tyco, WorldCom, etc. Investors also have a fiduciary responsibility to vote proxies in an appropriate way. Under ERISA, votes are considered plan assets and therefore may be subject to “prudent man” rules.

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Investment Columnists Investment Columnists

www.Forbes.com (See Ken Fisher, David Dreman, etc.)moneycentral.msn.com/investor/home.asp (See Jubak’s Journal) www.TheStreet.com (See J. Cramer et al.) Q: Why is this topic important?A: The columnists are often a source of good ideas and

may exert substantial influence over retail investors.

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Tools For Measuring Tools For Measuring Correlation / DiversificationCorrelation / Diversification

www.morningstar.com/ (Attribution analysis - select “Portfolio” link then

select “X-Ray” link)www.SmartMoney.com/RiskMap (Pay site.

Affordable way to license a retail version of the Barra equity risk software.)

Q: Why is this topic important?A: Risk management has taken on an increasingly

important role in the present bear market.

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Risk / Benchmark Components Risk / Benchmark Components

www.Russell.com/US/Indexes/default.aspwww.SPglobal.com/indexmain500_data.htmlwww.Barra.com (The gold standard for equity risk,

but the software is expensive. See SmartMoney Risk Map for a more affordable version.)

www.RiskGrades.com/retail/pat (Interactive tool)Q: Why is this topic important?A: One must be aware of the benchmark

components / weights in order to control benchmark risk

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Back-Testing / Historical Data Back-Testing / Historical Data

backtest.org (Jamie Gritton’s backtest Engines) biz.swcp.com/stocks/ (Historical price quotes for S&P 500 Stocks)Finance.Yahoo.com (Historical price quotes – select “Research” link then

“Historical Quotes” link) www.stls.frb.org/fred/data/irates.html (Historical

interest rate data from the Federal Reserve Bank of St. Louis)

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Historical DataHistorical Data

www.stern.nyu.edu/~adamodar/New_Home_Page/data.html (Several useful data sets)

www.cob.ohio-state.edu/fin/osudata.htm (Ohio State financial data finder)

cpcug.org/user/invest/datahist.html (links to data)Q: Why is this topic important?A: All theories should be empirically tested using the

scientific method. Data mining may help one uncover new strategies when combined with appropriate theoretical justification.

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Compliance / EthicsCompliance / Ethics

www.law.uc.edu/CCL/sldtoc.html

(The Securities Lawyer’s Deskbook)

www.sec.gov (SEC homepage)

www.aimr.org/standards/

(AIMR is the administrator of the CFA Program)

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VII: EducationVII: Education

Education (Advanced)

www.cob.ohio-state.edu/fin/findir/

(Websites and working papers of 1900+ Professors, 220+ schools, worldwide)

fisher.osu.edu/fin/resources_education/edcourse.htm

(PhD/MBA/BA Finance courses on the web)

welch.som.yale.edu/dir/ (List of academic journals, links, and directory of Finance professionals)

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Education (Advanced)Education (Advanced)


A: A competent investment professional should keep abreast of the latest research. Much of the published research is available years earlier in working paper form. Less experienced professionals may visit the introductory sites as a primer.

(Note recent MIT initiative to place all course content on the web for free and open to all.)

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Education (Introductory)Education (Introductory)

www.BerkshireHathaway.com/letters(Warren Buffet’s letters to Berkshire shareholders

since 1977)www.etrade.com (Select “Knowledge Center” link)www.Fool.com (Motley Fool site – select “Fool’s School” link)www.efmoody.com/investments/investmentsoverview.html(Various financial links on many diverse topics)

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Education (Introductory)Education (Introductory)

www.morningstar.com

(Morningstar University – select “University” link)

university.smartmoney.com/

(SmartMoney University)

personal100.fidelity.com/planning/investment/ (Peter Lynch on Investing)

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Business / Finance GlossaryBusiness / Finance Glossary

www.investorwords.com

(5,000+ definitions)

www.duke.edu/~charvey/Classes/wpg/glossary.htm

(7,000+ definitions)

the internet as the ultimate security analyst's tool

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