Price Wizard Slideshow

Price Wizard Predictor
Fundamental Valuation using Neural Nets

Next Section
Price Wizard: Fundamental Valuation
June 11, 2013
Parallax Financial Research, Inc. 16541 Redmond Way Suite 147C, Redmond, WA. 98052
Business: (425) 868-2486 URL: www.pfr.com
As-Is Intrinsic Value Calculator
Requires Neural Network Model Building Tool
Nets learn by example and then remember what they have learned
Nets allow all stores of value to be considered together within the context of sector and industry
Training is done on actual fundamentals and corresponding market prices
Once trained we just rerun each month with new dataThe model generates prices
Consistent Pricing
Based only on published fundamental corporate income & balance sheet data
Goal is Graham & Dodd intrinsic value
Based on how the market has converted fundamentals to price historically
No earnings expectations, analyst bias, or future assumptions
No adaptive schemes to fit price movements

Model does NOT change over time
Model is NOT changed by price movement
Evidence of Market Price to Model Price Convergence
IC numbers at 1,3,6, and 12 months

Return statistics year by year and overall
June 11, 2013
Building Market Predictors: Feedback & Behavior
Value Oriented Behavior

- Buy undervalued and sell overvalued
- Classic fundamental models
- Searching for equilibrium
- Example of Negative feedback or mean
reversion (e.g. thermostat)
Intrinsic value
Trend Oriented Behavior

- Crowd following
- Buy because its going up
- Ignore fundamentals or adopt untested
models to explain price
- Example of Positive feedback or trend
persistence (e.g. avalanche)
Intrinsic value
June 11, 2013
June 11, 2013
Sector neural nets

trained to price equities
today using all major
sources of fundamental
value included (e.g.,
earnings, sales, cash
flow, book values,
dividends, industry etc.)
+ economic factors
No analyst estimates
used
Price tends to converge

to valuation over time
Updated monthly
Outperforms CSFB/Holt
Reference Paper
Price Wizard: Stock Screening Application
June 11, 2013
Price Wizard : Testing
June 11, 2013
This shows the

average percentage
gain for all priced
stocks that were
undervalued by some
percentage at the time
of hypothetical
purchase during our
test period from Oct1989 to August 2004
(250 million min
market cap).
Note there is a 400

basis point advantage
at 12 months just by
being undervalued by
any amount.
June 11, 2013
This shows the excess

average percentage
gain by year for all
priced stocks that
were undervalued by
some percentage at
the time of
hypothetical purchase
during our test period
from Oct-1989 to
August 2004 (250
million min market
cap).
Note that during the

bubble years of 1998
and 1999,
undervalued stocks
underperformed the
index, while after the
bubble in 2000, they
soared.
June 11, 2013
Information Coefficient or
IC is an accepted measure
of skill for ranking stocks.
IC is calculated as follows:
1) Rank the stocks from
best long ideas (forecasted
highest return) to best short
ideas (forecasted lowest
return). 2) Rank the
subsequent period actual
returns, e.g. one month or 6
month from highest return
to lowest return. 3)
Calculate the correlation
between those 2 series of
numbers.
The higher the IC, the

better is the skill. A good
IC is typically in the .05-.06
range, and above .07 is
generally considered
excellent. IC is a measure
of the slope of the graph of
forecasted returns
compared with actual
returns.
Price Wizard: Stock Screening Application
June 11, 2013
10
Price Wizard: Macro Scale Application
June 11, 2013
11
June 11, 2013
12
June 11, 2013
13
Undervalued
Overvalued
Cap weighted sector

graphs
June 11, 2013
14
Dynamic Price Wizard & ExtremeHurst
Overvalued
June 11, 2013
15
Dynamic Price Wizard & ExtremeHurst
Overvalued
June 11, 2013
16

Price Wizard Slideshow

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Price Wizard Slideshow

Загружено:

Авторское право:

Доступные форматы

Price Wizard Predictor

Fundamental Valuation using Neural Nets

Price Wizard: Fundamental Valuation

June 11, 2013

Price Wizard: Fundamental Valuation

As-Is Intrinsic Value Calculator

Requires Neural Network Model Building Tool

No adaptive schemes to fit price movements

Evidence of Market Price to Model Price Convergence

IC numbers at 1,3,6, and 12 months

June 11, 2013

Building Market Predictors: Feedback & Behavior

Value Oriented Behavior

Trend Oriented Behavior

Price Wizard: Fundamental Valuation

June 11, 2013

Sector neural nets

Price tends to converge

Price Wizard: Stock Screening Application

June 11, 2013

Price Wizard : Testing

June 11, 2013

This shows the

Note there is a 400

Price Wizard : Testing

June 11, 2013

This shows the excess

Note that during the

Price Wizard : Testing

June 11, 2013

The higher the IC, the

Price Wizard: Stock Screening Application

June 11, 2013

Price Wizard: Macro Scale Application

June 11, 2013

Price Wizard: Macro Scale Application

June 11, 2013

Price Wizard: Macro Scale Application

June 11, 2013

Price Wizard: Macro Scale Application

Cap weighted sector

June 11, 2013

Dynamic Price Wizard & ExtremeHurst

June 11, 2013

Dynamic Price Wizard & ExtremeHurst

June 11, 2013

Вам также может понравиться