Computer-implemented method for portfolio construction and indexation of securities under a noisy market hypothesis

A computer system for portfolio construction and indexation of a plurality of stocks to a benchmark of investable bonds, said system comprising:

• a computer connected to a communication network, said computer receiving through the network real time data associated with a plurality of stocks in an investment portfolio, and the computer storing the received data in a multi-dimensional array;
• a storage medium connected to said computer and having a program stored thereon, the program executed by the computer and implementing simultaneous indexing of the plurality of stocks by:
• for a given stock in the plurality of stocks:
• a determining a relative value for the given stock at present time (t0) by dividing a net earnings for the given stock at the present time (t0) by a Risk Free Rate at the present time (t0), the Risk Free Rate and the net earnings being derived from the received real time data stored in the multi-dimensional array;
• b. calculating an intrinsic growth rate for the given stock for a period of time (t0−t−n), by dividing the determined relative value of the given stock at the present time (t0) by a relative value for the given stock at past time (t−n), such that the intrinsic growth rate is calculated exclusive of a price of the given stock, the relative value for the given stock at past time (t−n) being derived from the received real time data stored in the multi-dimensional array;
• c. determining a consistency of intrinsic growth rate at the present time (t0) for the given stock by calculating a deviation of the intrinsic growth rate returns for the given stock for the period of time (t0−t−n), and then dividing the calculated deviation of the intrinsic growth rate by the calculated intrinsic growth rate;
• d. calculating a discount rate at the present time (t0) for the given stock by (i) multiplying the determined consistency of intrinsic growth rate by the Risk Free Rate at the present time (t0) and said multiplying generating a risk premium, and (ii) adding the generated risk premium to the Risk Free Rate at the present time (t0), said adding resulting in the calculated discount rate at the present time (t0) for the given stock;
• e. generating a risk adjusted relative value at the present time (t0) for the given stock by dividing the net earnings at the present time (t0) by the calculated discount rate at the present time (t0);
• f. calculating a risk adjusted future relative value at future time (tn) for the given stock by multiplying the generated risk adjusted relative value at the present time (t0) with ((1+the calculated intrinsic growth rate determined at the present time (t0) t0){circumflex over ( )}a given number of periods of time);
• g. generating a risk adjusted rate of return on investment at the present time (t0) for the given stock by dividing the calculated risk adjusted future relative value at the future time (tn) by a market price for the given stock at the present time (t0), the market price for the given stock at present time (t0) being from the received real time data stored in the multi-dimensional array;
• and
• the computer according to the program simultaneously performs steps a through g. for each stock in the plurality of stocks, resulting in:
• the computer generating a portfolio index from the plurality of stocks at the present time (t0) weighted based on the generated risk adjusted rate of return on investment for each stock of the plurality of stocks to the benchmark of investable bonds,
• wherein the computer automatically adjusting the investment portfolio by applying the generated portfolio index to the investment portfolio, the adjusting implementing improved passive, systematic management of the plurality of stocks in the investment portfolio.