# US 7,610,230 B2 · Method and system for evaluating the investment ratings of a securities analyst

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- Number: US 7,610,230 B2
- Document ID: US7610230B2
- Status: Granted
- Kind: B2
- Application number: 10/953,844
- Filed: 2004-09-29
- Published: 2006-04-06
- Granted: 2009-10-27
- Earliest claimed: 2004-09-29
- Assignees: Morgan Stanley
- Inventors: Jeffrey Festog; Angus Lund; Melissa Miller; Leah Modigliani; Corey Ng; Daniel G. Patyk; Deborah Bronston
- Web page: https://patentgrep.com/patent/US7610230B2

## CPC

- G06Q 40/06: Asset management; Financial planning or analysis
- G06Q 40/00: Finance; Insurance; Tax strategies; Processing of corporate or income taxes
- G06Q: INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR

## Abstract

Systems and methods for measuring the performance of calls on securities by a securities analyst during an evaluation period are disclosed. According to various embodiments, the system may include a performance evaluation module. The performance evaluation module is for determining a value (called the “hit ratio”) indicative of the success of the calls by the analyst for securities within a benchmark group of securities within an industry covered by the analyst relative to a benchmark return for the benchmark group for the corresponding call periods of the calls. The hit ratio may be computed as the ratio of the sum of the actual excess returns to the sum of the total available excess returns for each call by the analyst over the call evaluation period. The contributions to the hit ratio by each call may be equally weighted or weighted according to market capitalization of the rated security.

## Claims

### Claim 1

A system for measuring the performance of calls on securities by a securities analyst during an evaluation period, comprising:
a computer device comprising a processor and a memory, wherein the memory stores instructions that are executed by the processor such that the computer device is programmed to calculate an analyst overall performance value indicative of the success of the calls by the analyst during the evaluation period for securities within a benchmark group of securities, wherein call ratings available to the analyst for each security in the benchmark group comprise a first call rating, a second call rating, and a third call rating, wherein the computer device calculates the analyst overall performance value by:
computing a benchmark return for the benchmark group for each call period during the evaluation period, wherein a call period corresponds to a time period during the evaluation period during which the analyst has a particular rating for a security in the benchmark group, such that there are multiple call periods during the evaluation period when the analyst changes the rating on one or more securities in the benchmark group during the evaluation period;
computing a total available excess return for each call by the analyst during the evaluation period, wherein the total available excess return for each call is based on an absolute difference of (i) a return of the security for the call during the call period for the call and (ii) the benchmark return for the call period, except that the total available excess return equals zero for each call by the analyst having the second call rating during the call period when the security performs within a band around the benchmark return for the call period;
computing a sum of the total available excess returns for each call;
computing a call success value for each call by the analyst during the evaluation period, wherein the call success value for each call is based on a return of the security during the call period of the call to the benchmark return during the call period;
computing a sum of the call success values for each call; and
computing the analyst overall performance value indicative of the success of the calls by the analyst during the evaluation period based on a ratio of (i) the sum of call success values to (ii) the sum of total available excess returns for each call by the analyst over the evaluation period, wherein:
for each call having the first call rating for one of the securities, the call success value for the call is related to the return on the security for the call period minus the benchmark return for the call period;
for each call having the second call rating for one of the securities, the call success value for the call is zero; and
for each call having the third call rating for one of the securities, the call success value for the call is related to the benchmark return for the call period minus the return on the security for the call period.

### Claim 2 (depends on 1)

The system of claim 1, wherein the computer device is programmed to calculate the analyst overall performance value by weighting the contribution of each call according to market capitalization of the rated security.

### Claim 3 (depends on 1)

The system of claim 1, wherein the computer device is programmed to calculate the analyst overall performance value by equally weighting the contribution of each call.

### Claim 4 (depends on 1)

The system of claim 1, wherein the computer device is further programmed to:
compute the standard deviation of the returns of the securities in the benchmark group for each call period of the evaluation period; and
compute the band around the benchmark return for each call period based on the computed standard deviation.

### Claim 5 (depends on 1)

The system of claim 1, wherein the benchmark group of securities include securities within an industry sector covered by the analyst.

### Claim 6

A computer-implemented method for measuring the performance of calls on securities by a securities analyst during an evaluation period, comprising:
determining, by a computer system that comprises a processor and memory that stores instructions to be executed by the processor, a benchmark return for a benchmark group of securities for each call period of the evaluation period, wherein a call period corresponds to a time period during the evaluation period during which the analyst has a particular rating for a security in the benchmark group, such that there are multiple call periods during the evaluation period when the analyst changes the rating on one or more securities in the benchmark group during the evaluation period, wherein calls ratings available to the analyst for each security in the benchmark group comprise a first call rating, a second call rating, and a third call rating;
computing, by the computer system, a total available excess return for each call by the analyst during the evaluation period, wherein the total available excess return for each call is based on an absolute difference of (i) a return of the security for the call during the call period for the call and (ii) the benchmark return for the call period, except that the total available excess return equals zero for each call by the analyst having the second call rating during the call period when the security performs within a band around the benchmark return for the call period;
computing, by the computer system, a sum of the total available excess returns for each call;
computing, by the computer system, a call success value for each call by the analyst during the evaluation period, wherein the call success value for each call is based on a return of the security during the call period of the call to the benchmark return during the call period;
computing, by the computer system, a sum of the call success values for each call; and
computing, by the computer system, an analyst overall performance value indicative of the success of the calls by the analyst during the evaluation period based on a ratio of (i) the sum of the call success values to (ii) the sum of total available excess returns for each call by the analyst over the evaluation period,
wherein the computer device calculates the analyst overall performance value, and wherein:
for each call having the first call rating for one of the securities, the call success value for the call is related to the return on the security for the call period minus the benchmark return for the call period;
for each call having the second call rating for one of the securities, the call success value for the call is zero; and
for each call having the third call rating for one of the securities, the call success value for the call is related to the benchmark return for the call period minus the return on the security for the call period.

### Claim 7 (depends on 6)

The method of claim 6, wherein determining the analyst overall performance value further includes weighting the contribution of each call according to the market capitalization of the rated security.

### Claim 8 (depends on 6)

The method of claim 6, wherein determining the analyst overall performance value further includes equally weighting the contribution of each call.

### Claim 9 (depends on 6)

The method of claim 6, further comprising computing, by the computer system, the standard deviation of returns of the securities in benchmark group for each call period of the evaluation period, and wherein the band around the benchmark return for each call period is determined based on the standard deviation.

### Claim 10

A computer readable medium having stored thereon instructions which, when executed by a processor, cause the processor to:
determine a benchmark return for a benchmark group of securities within an industry sector covered by a securities analyst for each corresponding call period for calls by the analyst on securities within the benchmark group during the evaluation period, wherein a call period corresponds to a time period during the evaluation period during which the analyst has a particular rating for a security in the benchmark group, such that there are multiple call periods during the evaluation period when the analyst changes the rating on one or more securities in the benchmark group during the evaluation period, wherein calls ratings available to the analyst for each security in the benchmark group comprise a first call rating, a second call rating, and a third call rating;
compute a total available excess return for each call by the analyst during the evaluation period, wherein the total available excess return for each call is based on an absolute difference of (i) a return of the security for the call during the call period for the call and (ii) the benchmark return for the call period, except that the total available excess return equals zero for each call by the analyst having the second call rating during the call period when the security performs within a band around the benchmark return for the call period;
compute a sum of the total available excess returns for each call;
compute a call success value for each call by the analyst during the evaluation period, wherein the call success value for each call is based on a return of the security during the call period of the call to the benchmark return during the call period;
compute a sum of the call success values for each call; and
compute an analyst overall performance value indicative of the success of the calls by the analyst during the evaluation period based on a ratio of (i) the sum of the call success values to (ii) the sum of total available excess returns for each call by the analyst over the evaluation period,
wherein the computer device calculates the analyst overall performance value , and wherein:
for each call having the first call rating for one of the securities, the call success value for the call is related to the return on the security for the call period minus the benchmark return for the call period;
for each call having the second call rating for one of the securities, the call success value for the call is zero; and
for each call having the third call rating for one of the securities, the call success value for the call is related to the benchmark return for the call period minus the return on the security for the call period.

### Claim 11 (depends on 10)

The computer readable medium of claim 10, having further stored thereon instructions which, when executed by the processor, cause the processor to determine the analyst overall performance value by weighting the contribution of each call according to the market capitalization of the rated security.

### Claim 12 (depends on 10)

The computer readable medium of claim 10, having further stored thereon instructions which, when executed by the processor, cause the processor to determine the analyst overall performance value by equally weighting the contribution of each call.

### Claim 13 (depends on 1)

The system of claim 1, wherein the securities comprise stocks, and wherein the calls on stocks comprise stock return calls.

### Claim 14 (depends on 6)

The method of claim 6, further comprising displaying the computed analyst overall performance value for the analyst on an output device.

### Claim 15 (depends on 6)

The method of claim 6, further comprising outputting, to an output device in communication with the computer system, the analyst overall performance value indicative of the success of the calls by the analyst during the evaluation period.

### Claim 16 (depends on 15)

The method of claim 15, wherein the outputting to an output device comprises displaying on a monitor.

### Claim 17 (depends on 1)

The system of claim 1, further comprising an output device in communication with the computer system for displaying the analyst overall performance value indicative of the success of the calls by the analyst during the evaluation period.

### Claim 18 (depends on 17)

The system of claim 17, wherein the output device comprises a monitor.