BLOOMBERG FOR EDUCATION

AKIN SAYRAK, PH.D.

NEW YORK CITY, NY
FRIDAY, J UNE 24, 2016
 Summary
Student-Managed Portfolios
Applications in Fixed-Income
Securities
Online Education and Bloomberg

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 Student-Managed Portfolios
Gathering Information
Screening
Analysis
Evaluating Performance
Maintenance and Accounting

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 Frequently-Used Screens
General:
ALT L (Keyboard Shortcuts)
SPDL (Speed Dial)
PEOP (Networking, People Search)
TOP (News)
NRS (News Sentiment)
BLP (Launchpad for customizing default
views)
BRIEF (Briefs on various subjects)

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Frequently-Used Screens, Cont.
Security Analysis
BI (Bloomberg Intelligence)
CN (Company News)
RV (Relative Valuation)
FA (FA CF, FA IS, FA BS) (Financial Statement Analysis)
WACC (Weighted-average Cost of Capital)
GF (Graph Fundamentals)
BRC (Research Portal)
ANR (Analyst Recommendations)
EE (Earnings & Estimates)
EVT (Company Events)
SPLC (Supply Chain Analysis)
XLTP (XPFS: Fundamental Scoring, XDCF: DCF , XIDA:
Company In-depth Analysis)

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{ANR}

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{EE}

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{SPLC}

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Using the DCF Model in Bloomberg
At the risk of stating the obvious, this approach is
designed for assets (firms) that derive their value
from their capacity to generate cash flows in the
future.
It works best for investors who either
Have a long time horizon, allowing the market time to
correct its valuation mistakes and for price to revert to
true value or
Are capable of providing the catalyst needed to move
price to value, as would be the case if you were an
activist investor or a potential acquirer of the whole
firm
Still, very useful as an educational tool!

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 {XDCF}
Bloombergs DCF Valuation Model on Excel
Allows for user inputs in key variables and
sensitivity analysis
Sometimes, the default parameter estimates
are not the best choices
Check with Damods site regarding the most
current estimates of the risk premium
Use {BETA} to estimate company risk premium
by making adjustments to the market, index, time
period, and data frequency.

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 Using Relative Valuation in
Bloomberg
This approach is easiest to use when
There are a large number of assets comparable to the one
being valued
These assets are priced in a market
There exists some common variable that can be used to
standardize the price
This approach tends to work best for investors
Who have relatively short time horizons
Are judged based upon a relative benchmark (the market,
other portfolio managers following the same investment
style etc.)
Can take actions that can take advantage of the relative
mispricing; for instance, a hedge fund can buy the under
valued and sell the over valued assets

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{RV}

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Frequently-Used Screens, Cont.
Technical Analysis
Momentum and Contrarian Effects
RSI (Relative Strength Indicator)
Sector Rotation
RRG (Relative Rotation Graph)
Difficult topic to reconcile with the rest of
the standard finance curriculum
Professional use is wide-spread

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{RSI}

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{RRG}

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Frequently-Used Screens, Cont.
Portfolio Management
EQS (Equity screening)
BBU (Upload portfolios, lists, etc.)
PRTU (Portfolio Administration)
PORT (Portfolio and Risk Analytics)
PTT (Portfolio Trade Ticket)

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 {EQS}
Using various ad hoc or objective metrics.
Piotroski Score: One point if a stock passes
each test and zero if it doesnt. The maximum
score is 9.
Challenge: Custom benchmarking with
periodic resets.
Use the rich ETF universe to pick a proper
benchmark

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 Piotroski Score
1. Net Income: Bottom line. Score 1 if last year net income is positive.
2. Operating Cash Flow: A better earnings gauge. Score 1 if last year
cash flow is positive.
3. Return On Assets: Measures Profitability. Score 1 if last year ROA
exceeds prior-year ROA.
4. Quality of Earnings: Warns of Accounting Tricks. Score 1 if last year
operating cash flow exceeds net income.
5. Long-Term Debt vs. Assets: Is Debt decreasing? Score 1 if the ratio
of long-term debt to assets is down from the year-ago value. (If LTD is
zero but assets are increasing, score 1 anyway.)
6. Current Ratio: Measures increasing working capital. Score 1 if CR
has increased from the prior year.
7. Shares Outstanding: A Measure of potential dilution. Score 1 if the
number of shares outstanding is no greater than the year-ago figure.
8. Gross Margin: A measure of improving competitive position. Score 1
if full-year GM exceeds the prior-year GM.
9. Asset Turnover: Measures productivity. Score 1 if the percentage
increase in sales exceeds the percentage increase in total assets.

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 Analyzing the Short-List
Industry analysis
Financial statement analysis
Analysts estimates and recommendations
DCF or relative valuation
Corporate governance
M&A and private equity
Activist investors

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{PRTU}

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{PORT}/Attribution/Summary

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 Maintenance and Accounting
No automated corrections for dividends, splits, etc.
No automated correction for corporate actions, mergers and
acquisitions, takeovers, etc.
No cost-effective portfolio accounting platform available
Implications:
Manual calibration to brokerage reports required periodically.
Probably too challenging for students to perform this calibration
without faculty advisers oversight.
Bloombergs solution: Synchronize portfolio with the
brokerage account overnight.
Problem: The PM would still want to retrieve reports about all
corporate events for the entire portfolio within the electronic
environment.
It is not a holistic solution.

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 Transaction Management
{PTT} is the recommended way of
recording portfolio transactions.
Make sure Update Portfolio Cash is on.
Adjust holdings for splits, mergers, etc.
Adjust for actual cash position at least on
a weekly basis
Small error introduced, but {TRA} (Total
Return Analysis) will remain accurate as it
uses an adjusted price series

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Trading using {PTT}

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 Suggestions
Provide a holistic framework in PRTU for proper accounting of
corporate actions, dividend payments, splits, etc.
Dividends can be realized on the ex-dividend date as consistent
with the CFA Institutes GIPS.
Provide detailed reporting options for all corporate events
directly affecting share price and number of shares in a
portfolio.
Having these tools in Bloomberg will put an end to the search
for a cost-effective solution for portfolio-specific accounting
issues in the university domain.
This may also be very useful for small money-management
shops that cannot afford Bloomberg otherwise, esp. if reporting
can be made consistent with the existing financial regulation.

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 Fixed-Income Securities
Bootstrapping the Term-Structure
Forward Rates
Interest Rate Swaps
Duration Gap Management/Immunization
Exercise

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Bootstrapping the Active Treasuries

{PX1}

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Pricing an Active Treasury
{DES}

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 Pricing an Active Treasury
Obtain the discount factors from the
{XZCC} template
Forward rates are also available on {XZCC}
Interpolate the discount factors to match
the cash flows
Compare the computed value with market
price in {YAS} and the matrix price in
{BVAL}

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Market Price in {YAS}

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Matrix Price in {BVAL}

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 Interest Rate Swap Example
Balance sheet for a AA-rated commercial bank is
provided below.
Objective: Immunize the balance sheet to no more
than 50 bps of the assets.
Assets Liabilities
250 million 5-year note, c=5%, semi 350 million 0.5-year note, c=25bps, semi
150 million 3-year note, c=3%, semi
Book Value of Equity = 50 million

Screens Used: {USSW} and {SWPM}

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Swap Rates from {USSW}

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Reconstituting the SWAP Rates

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Discount Factors from {SWPM}

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Discount Factors From {SWPM}/Cashflow

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 Online Education
Changes in university governance in
concert with changes in priorities
Fast and uncontrollable shift to a new
educational paradigm
Many unresolved issues
Unchartered territory as a mainstream venue
Technical limitations
Dissemination of information and licensure

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 Bloomberg and Online Education
Bloombergs current model for university
use does not support online education
As online programs become populated,
Bloombergs absence will be an issue for
all parties
Careful planning and working together with
universities will be required in the very
near future.

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 Suggestions
Provide time-specific virtual access for
online students
Make BMC training more widespread and
affordable (free?).
Online students will need this kind of training
At a minimum, provide more flexible
licensure for the university domain to
accomodate online programs

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