-----Original Message----From: Rawley Thomas [mailto:Rawley@LCRT.com]
Sent: Friday, July 20, 2007 12:15 PM
To: Tony Rossitto (antonino.s.rossitto@bankofamerica.com); Aaron VanGetson;
aaron.meder@ubs.com; Abol Jalilvand (ajalilv@luc.edu); Adam Cohen; Adam Gehr
(agehr@depaul.edu); Alex Rabinovich (alex.rabinovich@morningstar.com); Andy Mose; Amit
Dugar; Amit Dugar (amit_dugar@yahoo.com); Andrew McElheran
(andrew.mcelheran@hewitt.com); Ashok Abbott; Bart Madden (bartmadden@yahoo.com); Bill
Anstine (AnstineW@yahoo.com); Bill Hass (WJHass@aol.com); Bob Atra (atraro@lewisu.edu);
Brett Rentmeester; Carson Boneck (cboneck@qsg.com); Chris Goebel
(chris.goebel@hewitt.com); David Hightower (hightower@futures-research.com); David Trainer
(David.Trainer@NewConstructs.com); Debbie Nochlin (dnochlin@imca.org); Dennis Aust
(Dennis.Aust@chartermast.com); Doug Allen (dougallen1@sbcglobal.net); Douglas Hoerr; Ellen
Riccardi; Frank Leibor (fleiber@leiberassociates.com); Greg Jania (gjj@wpglobalpartners.com);
Ishak Mohammed; Jack Rader; Jack Tilton (jrtilton@comcast.net); jacqueline@drexel.edu; Javier
Estrada (jestrada@iese.edu); Jeff Nevins (Nevins@fana.com); Jenny Wong
(Jenny.Wong@rrd.com); Jill Epstein; Jim Grant (jim@jlgresearch.com); Joe Simpson; John Ptak;
jpayne@txstate.edu; Keith Black (kblack@stuart.iit.edu); kenia.iskantina@abnamro.com; Lee
Hayes (hayeslt@comcast.net); Marc Tourville; Mark Hooker (mark_hooker@ssga.com); Mark
Ubelhart; Melanie Angers (MAngers@gsb.uchicago.edu); Mike Lindh (michael.lindh@RandT.com);
Mike Wolcott (mwolcott@yahoo.com); Nadia Van Dalen (nadia.vandalen@morningstar.com); Nick
Padgett (nick.padgett@emiquon.com); Paul Kaplan (paul.kaplan@morningstar.com); Peter Beno
(pbeno@highbrookpartners.com); Peter Carl (pcarl@gsbalum.uchicago.edu); Ralph Goldsticker
(ralphg@mcm.com); Rebecca Fender (rebecca.fender@cfainstitute.org); Ricardo Bekin
(rbekin@ativoresearch.com); RobertAtra@cs.com; Ron Holland
(Ron.Holland@morganstanley.com); Ronald Ewing; Russell E. Long
(russell_long@standardandpoors.com); Sachin Dole (sdole@saventech.com); Salman Hamidani
(salman.hamidani@ubs.com); Samir Raza (samir.raza@hewitt.com); Sergei Khamdiev
(skhamdiev@hotmail.com); Shantal Alonso; Sheng Guo (shengguo@uchicago.edu); Shepherd
Pryor (ShepPryor4@aol.com); Steven Youngren; Susan Mangiero (smm@bvallc.com); Ted Steven
(ted.steven@mts.net); Terry Odean; Theodore K. Wood; Tim Bixler (tim.bixler@creditsuisse.com); Tom Larsen (TLarsen@hlmnet.com)
Cc: Charles Beauchamp
Subject: Practitioner Demand Driven Academic Research Initiative (PDDARI)
Practitioner Demand Driven Academic Research Initiative (PDDARI)
Hi All,
The next meeting of FMA PDDARI as supported by the CFA Society of Chicago occurs
at:
Tuesday July 24th at 12:45 CDT (1:45 EDT, 10:45 PDT) – Right after the
Education Group whose meeting begins at 12 Noon.
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La
Salle Drive, Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265778-9101; Conference call to end by 2 PM; Meeting may continue.
For future planning, these meetings occur the fourth Tuesday each month at 12:45
CDT, following the Education Group meeting which begins at 12 Noon.
August 28, 2007
September 25, 2007
October 23, 2007 – NO Meeting ! (Rawley at FMA Annual Meeting & “vacation”)
November 27, 2007
December 25, 2007 – NO Meeting ! (Christmas)
If you would like a box lunch for the Task Force meeting and have NOT
signed up for the Education Group, please e-mail Shantal Alonso directly at
salonso@cfachicago.org .
The Society web site link for current drafts of research initiatives, meeting
agendas, and Conflicts of Interest Discussion is FMA PDDARI as supported by the CFA
Society of Chicago.
Agenda
1. FMA (Rawley) – Next Practitioner Research Committee Conference Call on
2.
3.
4.
5.
Monday September 17, 2007
a. Teaching persons listing topics for research on how best to use the
FMA website to identify potential researchers if they are interested in
conducting a search to draw out demand
b. Developing guidelines for listing funded research and paid consulting do we even need guidelines or will the market take care of things as
long we provide adequate disclosure?
c. How should we promote the initiative to members before, during and
after the Annual Meeting?
d. FMA Annual Meeting Thursday October 18th 9:45 AM Orlando - Special
Panel on how professional associations work with the academic
community – Paul Kaplan is representing the CFA Society, Steve
Davidson is representing the Securities Industry and Financial Markets
Association (SIFMA) and Kevin Roth is representing the Association of
Financial Professional (AFP). Rawley is moderating and describing
PDDARI.
Fundamental Indexation. – No responses yet from any recipient of
invitation to participate. Katy Sherrerd of Research Affiliates; Cliff Asness
(cliff.asness@aqr.com); David Burkart (david.burkart@barclaysglobal.com);
Bruce
Bond
(BBond@PowerShares.com);
John
Southard
(jsouthard@powershares.com); Jeremy Siegel (Sieglel@Wharton.UPenn.edu);
Jeremy Swartz (JSwartz@WisdomTree.com) Rob Arnott; Jason Hsu; Jack
Wildermuth
(wildermuth@rallc.com).
Any
ideas
for
encouraging
responses?
Charles F. Beauchamp effects of fund reported residual values on the
performance measurements of private equity and the predictability of final
fund performance using reported residual values. Any interest? – Joe
Simpson, Randy Schostag
Benchmarking – Joe Simpson status report
Bob Atra – Research Status Report
a. Three Phase Dividend Discount Model (ROPE – Return on Payout /
Equity model) – regression toward the mean substantially increases
accuracy of model and explains its use in the practitioner community
relative to the traditional one phase Gordon DDM – Plans for next
steps
b. Applying the Kelly Formula of edge / odds information advantage to
portfolio weighting on actual and back test portfolios – Contrast to cap
6.
7.
8.
9.
10.
11.
12.
weighting, equal weighting, and fundamental weighting – anyone
interested in working with Bob and me? Edge relates to under (over)
intrinsic valuation.
Vision Statement (Rawley) – Jack Rader suggested renaming it to “Shared
Philosophy” and provided some suggested edits – on Rawley’s desk for next
draft
Cross Sectional Risk Measurement (Rawley)
a. Complete new better draft started by Paul Kaplan to avoid confusion
with time series; on Rawley’s desk for next draft
b. Complete 7 year data received from Ironwood for Stable Paretian and
other distributional analyses
c. Paul volunteered Morningstar data on 3,600 funds under certain
conditions to Ashok Abbott for analysis; project started
Hewitt Associates – Mark Ubelhart and Samir Raza – Anything new to
report?
Asset Allocation – Peter Carl, Aaron Meder, Ralph Goldsticker –
anything new to report?
Aaron VanGetson – Demand Driven Disclosure (I-3-D).
Other agenda items
Next Meeting Date Time (4th Tuesday of Each Month) Tuesday August 28th
at 12:45 CDT (1:45 EDT, 10:45 PDT)
Thanks.
Rawley Thomas (The “T” in HOLT)
VP of Practitioner Services of the Financial Management Association (FMA)
Chairman of the FMA Practitioner Research Committee
Chairman of the FMA PDDARI Meeting Supported by the CFA Society of Chicago
Principal of the Minnesota Business Valuation Group
President and Co-Founder of LifeCycle Returns, Inc. (LCRT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
June 22, 2007
Practitioner Demand Driven Academic Research Initiative (PDDARI)
Hi All,
The next meeting of the Society’s PDDARI Task Force occurs at:
Tuesday June 26th at 12:45 CDT (1:45 EDT, 10:45 PDT) – Right after the
Education Group whose meeting begins at 12 Noon.
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La
Salle Drive, Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265778-9101; Conference call to end by 2 PM; Meeting may continue.
For future planning, these meetings occur the fourth Tuesday each month at 12:45
CDT, following the Education Group meeting which begins at 12 Noon.
If you would like a box lunch for the Task Force meeting and have NOT
signed up for the Education Group, please e-mail Shantal Alonso directly at
salonso@cfachicago.org .
The Society web site link for current drafts of research initiatives, meeting
agendas, and Conflicts of Interest Discussion is FMA PDDARI as supported by the CFA
Society of Chicago.
The FMA web site has gone live with a Blast Announcement to its 3,000 members. That web site
is: http://www.fma.org/PDDARI/PDDARI.htm Please check it out.
Agenda
1. For 25 minutes, Bart Madden will present his work on disclosure of
2.
3.
managements’ model linking their firm’s performance to stock price. See
attached article from the Journal of Applied Corporate Finance.
Does the group prefer highlighted agendas or non-highlighted ones?
Financial Management Association (FMA) (Rawley)
a. Went live with E-Mail Blast Announcement to its 3,000 members.
b. Ashok Abbott of West Virginia University has agreed to oversee
graduate students to work on:
i. Time Series Risk Ranking
ii. Cross Sectional risk measurement
iii. Valuation of private and illiquid equity within portfolios
iv. Valuation of possibly mis-priced bonds within portfolios
c. Paul Kaplan and I had a conference call Friday June 8th with Ron Surz
on benchmarking. Ron agreed to work with Joe Simpson on a request
for research.
d. Jessica Conser of Colorado State University (CSU) wishes to
collaborate with another Professor at CSU on initiative #16: “Are
Earnings Estimates already Embedded in Stock Prices. Specifically,
following the work of Robert Schiller, Vernon Smith, and other
behavior finance people on market over reaction, the PDDARI
“Thought Partners” wish to decompose the effects of earnings,
sentiment or noise, EPS surprises, and DCF intrinsic values on stock
price level and change. Suggests need for research specification on the
FMA web site to assure academics’ understanding of “Thought Partner”
needs.
e. Suman Banerjee of Tulane e-mailed us an excellent article on “Fat
Tails and Slumping Shoulders: Kurtosis and the Market Microstructure
of Daily Stock Returns.” Paul Kaplan and I are responding to
encourage his efforts.
f. Javier Estrada, program chair for the FMA European Conference just
4.
5.
6.
7.
8.
9.
10.
11.
ended, is researching the geometric mean criteria of portfolio
construction.
Fundamental Indexation. Paul, Mike, Lee and I finished the draft on
Alternative Weighting Strategies. I e-mailed an invitation to Katy Sherrerd of
Research Affiliates; Cliff Asness (cliff.asness@aqr.com); David Burkart
(david.burkart@barclaysglobal.com);
Bruce
Bond
(BBond@PowerShares.com); John Southard (jsouthard@powershares.com);
Jeremy
Siegel
(Sieglel@Wharton.UPenn.edu);
Jeremy
Swartz
(JSwartz@WisdomTree.com) Rob Arnott; Jason Hsu; Jack Wildermuth
(wildermuth@rallc.com) to participate in further drafting. No responses yet.
S&P – I met with Cliff Griep on Friday, June 8. Cliff is the Chief Risk Officer
and Executive Managing Director for Standard & Poor’s. I sent Cliff a followup e-mail, which said in part: “I will call Steve Davidson to plant the seed of
using SIFMA as a possible coordinating vehicle for implementing PDDARI with
S&P, Moody’s, Fitch, and Duff and Phelps on academic research of common
interest. I will also continue to encourage dialogue within the FMA PDDARI as
supported by the CFA Society of Chicago to flush out the initiative of
analyzing both debt and equity with the same framework and metrics.
Perhaps some collaboration with S&P on this critical topic for the profession
will evolve. A conceptually sound, empirically validated Framework on capital
structure and dividend policy would help corporate management focus on the
right objectives to improve capital market efficiency.”
Hewitt Associates – Mark Ubelhart and Samir Raza – Anything new to report?
Vision Statement – Lee Hayes’ vision statement draft is on the web site. I
proposed some additions in an e-mail to Javier Estrada. Paul has agreed to
make the next draft to integrate the two drafts within a historical context
based on Peter Bernstein’s Capital Ideas Evolving.
Aaron VanGetson – Demand Driven Disclosure (I-3-D).
Other agenda items
I will be in Orlando Tuesday, October 23rd on vacation after the Orlando FMA
Annual Meeting. Is someone else willing to lead the PDDARI meeting that day,
do you want me to try to phone in, or should we cancel the meeting for that
October month only?
Next Meeting Date Time (4th Tuesday of Each Month) Tuesday July 24th at
12:45 CDT (1:45 EDT, 10:45 PDT)
Thanks.
Rawley Thomas (The “T” in HOLT)
VP of Practitioner Services of the Financial Management Association (FMA)
Chairman of the FMA Practitioner Research Committee
Chairman of the FMA PDDARI Meeting Supported by the CFA Society of Chicago
Principal of the Minnesota Business Valuation Group
President and Co-Founder of LifeCycle Returns, Inc. (LCRT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
From: Rawley Thomas [mailto:Rawley@LCRT.com]
Sent: Thursday, May 17, 2007 2:15 PM
To: Warren Isabelle; Aaron VanGetson; aaron.meder@ubs.com; Abol Jalilvand; Adam Cohen;
Adam K Gehr; ALEX RABINOVICH; Andy Mose; Amit Dugar; Amit Dugar; Ashok Abbott; Bart
Madden; Bill Hass; Bob Atra; Brett Rentmeester; Carson Boneck; Chris Goebel; David Hightower;
David Sekera; Debbie Nochlin; Doug Allen; Douglas Hoerr; Ellen Riccardi; Frank Leibor; Greg
Jania; Ishak Mohammed; Jack Rader; jacqueline@drexel.edu; Javier Estrada; Jeff Nevins; Jill
Epstein; jim@jlgresearch.com; Joe Simpson; John Ptak; jpayne@txstate.edu; Keith Black;
kenia.iskantina@abnamro.com; Lee Hayes; Marc Tourville; Mark Hooker; Mark Ubelhart; Melanie
Angers; Mike Lindh; Mike Wolcott; NADIA VANDALEN; Nick Padgett; PAUL KAPLAN; Peter Beno;
Peter Carl; Ralph Goldsticker; Rebecca Fender; Ricardo Bekin; Ron Holland; Ronald Ewing;
Russell E. Long; Sachin Dole; Salman Hamidani; Samir Raza; Sergei Khamdiev; Shantal Alonso;
Shepherd Pryor; Steven Youngren; Susan Mangiero; Ted Steven; Terry Odean; Theodore K.
Wood; Tom Larsen; Tony Rossitto
Subject: Agenda for Next FMA PDDARI Meeting Supported by the CFA Society of Chicago May
22, 2007 at 12:45 CDT
Practitioner Demand Driven Academic Research Initiative (PDDARI)
Hi All,
The next FMA PDDARI Meeting Supported by the CFA Society of Chicago occurs at:
Tuesday May 22nd at 12:45 CDT (1:45 EDT, 10:45 PDT) – The Education
Group canceled its meeting this month.
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La
Salle Drive, Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265778-9101; Conference call to end by 2 PM; Meeting may continue.
For future planning, these meetings occur the fourth Tuesday each month at 12:45
CDT, following the Education Group meeting which begins at 12 Noon.
If you would like a box lunch for the meeting, please e-mail Shantal Alonso
directly at salonso@cfachicago.org .
The web site for the FMA PDDARI meeting supported by the CFA Society of Chicago
is FMA PDDARI . Please check it out for current drafts of Research Initiatives, Agendas, Conflicts
of Interests Policies, and draft Vision Statement.
Agenda
1. Financial Management Association (Rawley)
a. The FMA Practitioner Research Committee approved the FMA
PDDARI Web Site, which will go live any day now with a blast
announcement to the FMA’s approximately 3,000 members. Check
it out at http://www.fma.org/PDDARI/PDDARI.htm
b.
Special panel for the FMA October Annual Meeting approved for
Academic / Practitioner experiences including PDDARI. Rawley to
moderate Steve Davidson VP Capital Markets Research for the
Society of Securities Industry and Financial Markets Association(S I
F M A), Kevin Roth, Director of Research for the Association of
Financial Professionals (AFP), and our own Paul Kaplan of
Morningstar.
c.
Position paper on narrow exception for non-disclosure of
proprietary algorithms e-mailed to Betty Simpkins for consideration
of the editors of the Journal of Applied Finance (JAF).
2. Aaron VanGetson – Investor Demand Driven Disclosure (I-3-D)
status report
a. Bart Madden has agreed to present his work on disclosure of
managements’ model linking their firm’s performance to stock price
for 25 minutes during our next meeting on June 26 th. See attached
article from the Journal of Applied Corporate Finance.
b. E-mail sent to Jonathan Boersema of the CFA Institute to try to
connect to the Institute’s Global Performance Indicators initiative.
c. Concept of using the proxy process and CFA Society Global
Performance Indicators (GPIs) as free market encouragement of
better disclosure. See web site with information on the process and
rules associated with shareholder proposals:
http://www.shareholderproposals.com/.
3. E-Mail drafted to invite Research Associates and other firms interested in
fundamental indexation to participate in the creation of the Request for
FMA Research. May be released next week with current draft of request
for research on “Alternative Weighting Strategies.”
4. Hewitt Associates status report by Samir Raza or Mark Ubelhart on
migration of pivotal employees, liability asset matching, economic
capitalization of expenses, and economic accounting of executive stock
options
5. Lee Hayes – draft available on web site on PDDARI Vision.
6. Bob Atra – Dividend discount models research extended to 3-phase
(ROPE) and possibly Merrill Lynch; trying to link price level tracking error
to literature. Planned focus on measurement of models: robustness,
accuracy, unbiased, and predictive capability.
7. Valuation of Distressed Firms (David Sekera and Rawley Thomas)
– contacted Russ Long of S&P (serves on FMA Board) to explore using the
same framework and metrics for valuation analysis of both debt and
equity; availability of market values of debt instruments
8. Cross Sectional Analysis of Return, Risk and Attribution- drafting by
Lee Hayes, Paul Kaplan, and Rawley
9. Global Asset Allocation – Peter Carl and Chris Goebel may join
Ralph Goldsticker on this Initiative. Consider linking fundamental DCF
intrinsic value and supply / demand commodity price level equilibrium
analysis with sentiment to predict change in correlations between stocks
and commodities from negative or low to significantly positive. Issue of
silos of price change research and price level research.
10. Open Source “R” Statistic Library – Peter Carl – relevance to risk
measurement because automated calculations for volume applications
have not been available for the Stable Paretian distribution and other key
statistical needs.
11. Independent Valuations of Securities owned by Mutual Funds
Where Thin or No Markets Exist – Debt, Public Equity, Private
Equity – University of West Virginia (Ashok Abbott) willing to coordinate
effort and share results with the CFA Society and FMA. After request for
research drafted by U of West Virginia and Minnesota Business Valuation
Group (MBVG) produced, invite National Association of Certified Valuation
Analysts (NACVA), American Society of Appraisers (ASA), Institute of
Business Appraisers (IBA), and AICPA to participate. Objective is to
explore less labor intensive, more automated approaches which produce
more defensible valuations at practical cost, so mutual funds investors are
not disadvantaged by the daily net asset price mechanism. Is anyone in
the CFA Society of Chicago interested in collaborating on the effort?
12. Other Agenda Items
13. Next Meeting Date Time (4th Tuesday of Each Month) Tuesday June 26th
at 12:45 CDT (1:45 EDT, 10:45 PDT)
Thank you.
Rawley Thomas
VP of Practitioner Services of the Financial Management Association (FMA)
Chairman of the FMA Practitioner Research Committee
Chairman of the FMA PDDARI Meeting Supported by the CFA Society of Chicago
President and Co-Founder of LifeCycle Returns (The “T” in HOLT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
April 20, 2007
Practitioner Demand Driven Academic Research Initiative (PDDARI)
Hi All,
The next meeting of the Society’s PDDARI Task Force occurs at:
Tuesday April 24th at 12:45 CDT (1:45 EDT, 10:45 PDT) – Right after the
Education Group whose meeting begins at 12 Noon.
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La
Salle Drive, Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265778-9101; Conference call to end by 2 PM; Meeting may continue.
For future planning, these meetings occur the fourth Tuesday each month at 12:45
CDT, following the Education Group meeting which begins at 12 Noon.
If you would like a box lunch for the Task Force meeting and have NOT
signed up for the Education Group, please e-mail Shantal Alonso directly at
salonso@cfachicago.org .
We now have a web site link for current drafts of research initiatives, meeting
agendas, and Conflicts of Interest Discussion. PDDARI Task Force
Agenda
1. Financial Management Association (FMA) (Rawley)
a. The current list of topics will go live on the FMA web site in the
next few weeks to elicit academic responses to our requests for
research. Risk Ranking is the #1 topic.
b. At the FMA Mid-Year meeting, the Board approved the appointment
of Betty Simpkins as head editor for the Journal of Applied Finance
(JAF). Since JAF is a natural outlet for much of the planned CFA
Society PDDARI Task Force research, I suggested that we review
the current requirement that all proprietary algorithms be placed in
the public domain as a prerequisite for academic publication. The
attached position paper lays out the issues. Traditional top
academic research journals have required that all research have
the capability of being replicated by other academics to prevent
fraud.[1] This requirement is fine for academics working with public
sources like Compustat. However, for comparative testing of the
results of proprietary algorithms, requiring algorithm replication
obviously directly conflicts with the valuable intellectual property
rights of the owners. Besides JAF, other options for academic
publication may include The Financial Analyst Journal (FAJ), Journal
of Portfolio Management (JPM) and Journal of Applied Corporate
Finance (JACF), which we think do not require full replication, but
which also do not have the same high stature of JAF for academic
recognition, advancement, and tenure. Betty and Jack Rader (FMA
Executive Director) will review my attached document and submit
it to the other editors for their review. The editors have
traditionally retained the power to make the decision to reject
papers which cannot be replicated. If the editors believe that this
absolute policy should be reconsidered in response to PDDARI with
carefully considered carve out exceptions, they may likely seek
FMA Board approval for this strategic policy change. Would the
proposed carve out narrow exceptions work for the Task
Force?
2. Hewitt Associates introduction to Mark Ubelhart (present) and Samir
Raza (not present)
a. Mark is Principal, Practice Leader for Value Based Management and
Architect of Human Capital Foresight for Hewitt Associates. Samir
leads the shareholder value initiative as a member of the corporate
finance group team at Hewitt Associates. He is also managing
research aspects of the Human Capital Foresight™ project,
leveraging over a decade of management consulting experience
with clients in North America, Europe, and Asia, and research
experience in academic institutions. Currently, Mark, Samir,
and Hewitt seek to join the PDDARI Task Force within the
CFA Society of Chicago to develop products for the
investment community that allow projecting industry stock
price inflection points based on sound, independent
academic research. Hewitt’s unique database, based on 22
3.
4.
5.
6.
7.
8.
million US employees from Hewitt’s HR outsourcing, benefit and
actuarial services, is updated monthly. Empirical evidence with
CSFB HOLT’s research suggests the flow of pivotal employees leads
to significant changes in CFROI® and stock prices thus potentially
providing an information advantage to portfolio managers.
Hewitt may also be interested in employing its actuarial pension
fund data to aid in the conceptual development of matching asset
products to liability cash flows. Hewitt helps design compensation
structures to encourage organizational change consistent with
shareholder value creation linked to sound human resource
principles.
b. Mark Ubelhart – report on Industries for which Hewitt as data. How would
this be consolidated for use by investment professionals?
c. Asset Pricing Models; Risk management methodologies; Integration
of Liability Management and Asset Management (Aaron Meder –
UBS)
d. What is the proper economic accounting and empirical valuation for
executive stock options from publicly available data? (Lee Hayes)
Aaron VanGetson – report on form agreement to cover academic’s
access to PDDARI Task Force members willing to provide data and other
assistance. Discussion of Investor Demand Driven Disclosure (IDDD).
Lee Hayes – report on Fundamental Indexation. Discussion of Paradigm
Shifting Vision for PDDARI.
Bob Atra – report on growth rates used in empirically validation of DCF
models; Mental Model Assumptions Underlying Portfolio Strategies on the
relationships of Noise, Transactions Costs, and Information Advantage. [2]
David Sekera - At his former position at a hedge fund, David was a
research analyst and provided buy / sell and long / short opinions for the
entire capital structure from debt to equity based on his
fundamental analysis and economic business valuation opinion. David and
I discussed the challenging decision related to buying the debt or buying
the equity of a firm in financial distress. Attached is an LCRT graphical
analysis of the most risky Cauchy distribution of under (over) valuation of
firms in high financial distress, where the distribution tails are so fat that
the mean fails to exist. We seek more accurate intrinsic valuation models
and analytical methodologies to separate firms into the debt pile or the
equity pile or both and why.[3]
Global Asset Allocation – Bob Atra, Ralph Goldsticker, Rawley Thomas.
I (Rawley) have not had the time to review the data on multiple countries
back to the 19th century provided by Bob Atra, or the time to perform a
Stable Paretian and Stable Paretian Cupola Analysis of the indices time
series to illustrate what Academics might do.
Relevant network connections to other professional associations
(Rawley)
a.
SIFMA – Securities Industry and Financial Markets
Association – Steve Davidson VP and Director of Research
engaged. Meeting with B of A, Goldman, JP Morgan, and CitiGroup
Directors of Research to determine their interest.
b. AFP – Association of Financial Professionals – declined
suggested request for empirically testing mental stock price
formation models of its members as being too “academic.” Seeking
other professional associations with potential interest, including
National Investor Relations Institute (NIRI) and National
Association of Certified Valuation Consultants (NACVA). Possibly
also SURFA (see below). AFP may be interested in pension funding
and disclosure issues.
c. SURFA – Society of Utility Rate Making Financial Analysts – placed
request for research with FMA on whether Congressional allowance
of acquisitions and the associated purchase premiums in the utility
industry affect the cost of capital or the market expected cash
flows. Interested in advanced DCF.
d. Strategic Risk Council of the Conference Board of Canada
Toronto Annual Meeting – Enterprise Risk Management (ERM)
might be more properly termed Enterprise Uncertainty
Management (EUM) due to the focus on uncertain immeasurable
events[4] as opposed to measurable distributions of risky events.
However, they are also interested in better methods for measuring
risky events and mitigating their loss. How do academics propose
that both corporations and portfolio managers address both
uncertain and risky events for practical decisions?
9. Economic Drivers of Intrinsic Valuation – For people willing to stay
later beyond the normal ending time, LCRT seeks help in its continuing
research. After incorporating the effects on DCF automated intrinsic
valuation of cash economic returns, sustainable growth rates, size, and
leverage, what additional economic drivers should be empirically tested
for relevant impacts on intrinsic valuations:
a. Fixed costs of trading per share appears significant (thanks to Mike
Lindh for suggesting this economic effect)
b. Dividend policy is also significant, with its significance increasing
after the decrease in the dividend tax rate to 15% - seems to be
measuring both investor tax premiums and risk preferences for
dividends now over capital gains later (unless the cash can be
employed at high returns as quantified in the sustainable growth
rate).
c.
Share repurchase, while significant, is less important than
dividends (thanks to Amit Dugar for suggesting this test).
d. % excess cash to assets seems relevant to smaller firms with
options to reinvest that cash at high excess returns, but not to
larger firms
e. How best to measure the effect of abnormal accruals on intrinsic
valuation (see Howard Schilit, Scott Richardson, etc.)
f. What other Economic Drivers of DCF Intrinsic Valuation should be
tested? Do multi-factor models suggest underlying Economic
Drivers which deserve empirical testing?
10. Other agenda items
11. Next Meeting Date Time (4th Tuesday of Each Month) Tuesday May
22nd at 12:45 CDT (1:45 EDT, 10:45 PDT)
Rawley Thomas
VP of Practitioner Services of the Financial Management Association (FMA)
Chairman of the FMA Practitioner Research Committee
Chairman of the CFA Society of Chicago PDDARI Task Force
http://www.PDDARI Task Force
President and Co-Founder of LifeCycle Returns (The “T” in HOLT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
Several instances of well publicized scientific fraud in proper empirical analysis have been published.
Consequently, editors naturally wish to minimize the risk that they publish research which subsequently
proves to be fraudulently produced.
[2]
Bob says: “Here is a graph of my thinking on the types of portfolio strategies that would be most
beneficial under certain assumptions about markets. It is a back of the envelope thinking which might help
the PDDARI Task Force synthesize some of our suggested research and spur our thinking about these
issues.
Feel free to comment or “move around” the strategies. I have not read the entire Poundstone book, so I
am guessing where the Kelly Criterion would fall. Of course where any strategy would fall could be up for
a healthy debate.
This survey may prove useful as well for someone doing more of a survey type of article.
My thinking was that indexing is associated with market efficiency, yet few believe the market is efficient
in all aspects. The three items identified -- noise, information, transactions costs -- can all be viewed as
different flavors of market inefficiency. Different types of indexing may be superior given different
sources of inefficiency. I threw in the other two just for discussion. Thanks, Bob
[1]
For example, Compustat and other data base vendors, which are traditionally available to Academics,
capture book values of debt, but not market values. Would market values of debt make a significant
difference to matching intrinsic valuations, especially with firms in financial distress? If desired, Rawley
will check with Russ Long on availability of S&P Bond pricing data to compliment traditional sources. What
are the best methods for estimating the market valuation of privately held debt (insurance and bank)
where no or few transaction prices exist?
[4]
Paul Kaplan’s “Mexican Peso Revaluation Problem.”
[3]
March 23, 2007
Practitioner Demand Driven Academic Research Initiative (PDDARI)
Hi All,
The next meeting of the Society’s PDDARI Task Force occurs at:
Tuesday March 27th at 12:45 CDT (1:45 EDT, 10:45 PDT) – Right after the
Education Group whose meeting begins at 12 Noon.
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La
Salle Drive, Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265778-9101; Conference call to end by 2 PM; Meeting may continue.
For future planning, these meetings occur the fourth Tuesday each month at 12:45
CDT, following the Education Group meeting which begins at 12 Noon.
If you would like a box lunch, please e-mail Lori Tews at ltews@cfachicago.org .
We now have a web site link for current drafts of research initiatives, meeting agendas, and
Conflicts of Interest Discussion. PDDARI Task Force
Agenda
1. Status Reports
a. Financial Management Association (FMA) (Rawley)
b.
i. Mid-Year Board Meeting occurred in San Diego during the
Southwest Finance Association Annual Conference
ii. Board most impressed with the engagement of senior leaders within
the Practitioner Community, the length, and the scope of Research
Initiatives
iii. Linking PDDARI to student chapters, education, and doctoral
students
iv. Jack Rader, Executive Director, requested preliminary draft of
Current List of Initiatives (attached for discussion) for placing on FMA
web site to elicit FMA member participation; plan to go live in the next
few weeks
v. Announced PDDARI during several sessions, the cocktail hour and
the luncheon. Substantial enthusiasm existed between 1-2 dozen
academics with whom I spoke. Academics want to work with
Practitioners.
Hewitt Associates – Introduction to Samir Raza (present) and Mark Ubelhart
(not present)
i. Mark is Principal, Practice Leader for Value Based Management and
Architect of Human Capital Foresight for Hewitt Associates. Samir leads
the shareholder value initiative as a member of the corporate finance
group team at Hewitt Associates. He is also managing research aspects
of the Human Capital Foresight™ project, leveraging over a decade of
management consulting experience with clients in North America,
Europe, and Asia, and research experience in academic institutions.
Currently, Mark, Samir, and Hewitt seek to join the PDDARI Task
Force within the CFA Society of Chicago to develop products for
the investment community that allow projecting industry stock
price inflection points based on sound, independent academic
research. Hewitt’s unique database, based on 22 million US
employees from Hewitt’s HR outsourcing, benefit and actuarial services,
is updated monthly. Empirical evidence with CSFB HOLT’s research
suggests the flow of pivotal employees leads to significant changes in
CFROI® and stock prices thus potentially providing an information
advantage to portfolio managers. Hewitt may also be interested in
employing its actuarial pension fund data to aid in the conceptual
development of matching asset products to liability cash flows. Hewitt
helps design compensation structures to encourage organizational
change consistent with shareholder value creation linked to sound
human resource principles. (Back ground information to be e-mailed
subsequent to this e-mail)
ii. Asset Pricing Models; Risk management methodologies;
Integration of Liability Management and Asset Management
(Aaron Meder – UBS)
iii. What is the proper economic accounting and empirical
valuation for executive stock options from publicly available
data? (Lee Hayes)
c. Bob Atra – Growth Rates used in valuation models – several
2.
3.
4.
programmed – currently running production to test the accuracy of
dividend discount model intrinsic valuations to stock prices produced
by each growth rate, equity risk premium, and CAPM beta
permutations. Little research published in academic community.
d. Mike Lindh – Fundamental Indexation – Separate Research Initiative
Planned.
e. Paul Kaplan (not present) – attending the “Q” Group; Risk Ranking in
Non-mean Variance World submitted to FMA.
f. Ralph Goldsticker – Global Asset Allocation – country index data sent
to Rawley. Bob Atra also provided data back to 1900. Rawley plans to
perform a Stable Paretian Analysis of the data with long short
weightings to illustrate the type of analysis we would like Academics to
research.
Other Professional Associations (Rawley)
c. Discussions begun with Kevin Roth, Director of Research for the
Association of Financial Professionals (AFP – Treasury
Professionals). Supplied three dozen topics of interest to members.
Discussing possibility of academic empirical testing of advanced
valuation models, which may prove relevant to Society’s members for
fundamental analysis in active portfolios.
Next Meeting - Tuesday April 24th at 12:45 CDT (1:45 EDT, 10:45 PDT)
Other Business
Rawley Thomas
President and Co-Founder
LifeCycle Returns, Inc. (LCRT) (The "T" in HOLT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
February 22, 2007
Hi All,
The next meeting of the Society’s PDDARI Task Force occurs at:
Tuesday February 27rd at 12:45 CST (1:45 EST, 10:45 PST) – Right after the
Education Group whose meeting begins at 12 Noon.
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La
Salle Drive, Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265778-9101; Conference call to end by 2 PM; Meeting may continue.
For future planning, these meetings occur the fourth Tuesday each month at 12:45
CST, following the Education Group meeting which begins at 12 Noon.
Agenda – New Information Highlighted in Yellow
1) Status Reports – Abstract added to Initiatives;
a) Paul Kaplan report on risk initiative – Risk Adjusted Ranking in a Non Mean-
Variance World and Cross Sectional Risk / Return Measurement of Portfolio
Results over an Internal of Time in a Non Mean-Variance World just about
ready to be submitted to the Financial Management Association (FMA)
b) Morningstar will evaluate research proposals and may provide data
on stocks, mutual funds, closed-end funds, ETFs, hedge funds, and
broad market indexes. Academic proposals that are deemed by
Morningstar to have particular value for practitioners may qualify for
waived or reduced-fee research charges.
c) Ironwood has proposed an agreement of hold harmless and nondisclosure for academics to execute in order to obtain data; Exploring
feasibility of combining separate monthly files with CUSIP numbers
into one file with all months and years and Total Shareholder Return
by month; will seek review of proposed agreement by Society Task
Force and FMA Practitioner Research Committee when it’s finished
d) Discussion
e) Rawley Thomas and Ralph Goldsticker – Investment Strategies Across
Global Asset Classes; David Hightower willing to contribute commodity data;
Timbervest may contribute data; Ralph Goldsticker willing to contribute
country index data for long short portfolios; Ralph and Rawley discussed
illustrating Cupola Stable Risk Reduction analysis with 70 permutations of four
long and four short countries; discussion
f) Mike Lindh report on Fundamental Indexation
i) Mike Lindh, Paul Kaplan, and Lee Hayes met for lunch; decided to
ii)
iii)
iv)
v)
split out Fundamental Indexation into separate request for
research – who will write the first draft?
Rawley Thomas suggests that we still need an Initiative which
combines the results of Indexation, Fundamental Indexation,
Multi-Factor, and DCF
(Rawley Thomas) – Consider adding as a weighting possibility in
addition to cap and size weights the Kelly Formula based on
Shannon’s information theory to apportion the fund according to
superior estimates of the probabilities relative to the implied
market expectations – edge/odds[1]
Lee Hayes – Consider new Initiative on Global Portfolio
Construction, place issue on next survey, and / or produce
conference on the subject
Discussion
g) Amit Dugar and Ralph Goldsticker report on multi-factor models; Paul
Kaplan suggested factor attribution analysis to cross sectional risk / return
measurement of portfolio results; discussion
h) Rawley Thomas report on DCF
(1) (1)Bob Atra – beginning research on best estimates for growth
to use in DCF valuation models using LCRT Research Platform
(2) (2)Beginning to explore feasibility of overlaying Company
(3)
Guidance and Consensus estimates over DCF Intrinsic
Valuations derived solely from historical data with no analyst
intervention to measure analysts’ estimates effect on model
accuracy and predictive capability; Per Tom Copeland, this
research methodology effectively separates the effect of
historical data from the effect of analysts’ estimates.
Discussion
i) Lee Hayes Liaison with Society Technology Group – Updating Task Force
Initiatives
i) Permission for LCRT to create stand-alone web pages for updating
PDDARI initiatives; link from CFA Society of Chicago web site; No
commercial links from web site; approval from Society Technology
group required.
2) Institutions willing to contribute data; Data Working Group – volunteers,
recruiting additional volunteers, data format, automation of analytical capability ;
(1) E-mailed Adam Cohen of Zacks a draft request for obtaining
permission from brokerage firms to include Barron’s
performance data
3) Discussion of next Initiatives; Additions; Volunteers to draft (Time permitting)
(1) Linking detailed data by individual investor and fund manager
(2)
to price formation process – arose at last meeting
Matching assets to liabilities of pension funds unresolved issue
(like risk measurement) – e-mails sent to Aaron Meder at UBS
and Mark Ubelhart at Hewitt – Lee Hayes – discussing this
within private wealth management – how to set the goals and
strategies to meet those goals, including behavioral finance
4) Does anyone work on derivatives and have an interest in eliminating the
systematic bias called the “volatility smile” in option pricing?
5) Rawley Thomas - Status of FMA Practitioner Research Committee
a) Committee Formed
i) Amy Edwards – SEC – added marketing flair to E-mail Blast to FMA
ii)
members on PDDARI
John Finnerty – Professor at Fordham University; written articles on
executive stock options; expert witness in valuation cases – suggested
that thought partners offer no exclusives on academic research,
but grant multiple academics access to the data and thought
b)
partner expertise in order to produce healthy competition and
avoid thought partner disappointment if one academic loses
interest
iii) Jack Rader – Executive Director of the FMA (ex-officio, non-voting)
iv) Mike Riley, former CFO of UAL and Postal Service; Professor at U of
Maryland
v) David Walker – Professor at Georgetown University; former Trustee for
the Financial Management Association
vi) Ralph Walkling – President of FMA; Professor at Drexel University (exofficio, non-voting)
Process under review
i) Role of Committee may change – Committee may facilitate establishing
relationship between practitioner thought partners and academics, instead
of formally approving practitioner requests for proposal submitted and
academic proposals submitted. Consequently, the Practitioner Thought
Partners may choose the academic proposal(s) they like with any help
from the Committee which they seek. This is more of a free market
system. However, the Committee is most willing to act as a filter so the
best academic proposals are forwarded to practitioner thought partners
for their review.
ii) How best to engage top academics in the effort – is publishing sufficient to
compete against consulting income? One important principle – avoid being
too directive on the research design and measurement methodologies –
see revisions to requests for research proposals.
iii) Some top scholarly journals require complete replication of data and
algorithms, which directly conflicts with practitioner intellectual property
rights; other outlets and alternatives to full replication under exploration.
For some publications, making the data available, but not the algorithms,
may be sufficient.
iv) Practitioner Requests for Research and Academic Research
Proposals likely to become 3-tiered for time efficient
communications and academic self selection into the process
(1) Title of Initiative
(2) One Page description
(3) Multi-Page detail for completeness to satisfy practitioner needs
and to develop mutual respect between the academic and
practitioner communities
v) Other professional associations contacted – some of these, like risk, affect
the investment community
(1) Society of Utility Regulatory Financial Analysts (SURFA) – President
Pauline Ahern Supportive, FMA member Ted Wood of Southwest Gas
producing initial list of topics – owner of the process
(2) Conference Board of Canada – attending brain storming session with
Strategic Risk Council on Enterprise Risk Management (ERM) on April
5th, including some academics; Karen Schoening-Thiessen, Conference
Board Senior Research Associate, owns the process
(3) Investment Management Consultants Association – contacts made;
process and Society proposals on risk sent; waiting for more
discussion with Debbie Nochlin, Managing Editor of The Journal of
Investment Consulting
(4) Received Tom Copeland’s suggested topics on corporate needs; passed
(5)
(6)
those along to Mike Riley
I sense Professional Associations are often interested in large research
initiatives addressing difficult practitioner decisions, NOT Tiny Topics
I plan to establish an advisory panel consisting of
representatives of the practitioner professional organizations
interested in PDDARI to facilitate two way flow of information
and provide a mechanism for continuing communication. The
advisory panel may enable us to combine proposals where
possible to avoid duplication. Will need a representative from
the CFA Society of Chicago in addition to Rawley
Rawley Thomas
President and Co-Founder
LifeCycle Returns, Inc. (LCRT) (The "T" in HOLT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
[1]
Of current relevance to our risk topics and portfolio construction, Bill Miller says in the just published
CFA Institute Global Perspectives on Investment Management: Leaning from the Leaders, “Money
Management involves knowing how much you commit to a position. Will it be 1 percent, 5 percent, 10
percent? I recommend the book Fortune’s Formula: The Untold Story of Scientific Betting System that
Beat the Casinos and Wall Street (by William Poundstone). It is a far better way of thinking about asset
allocation than mean-variance analysis.” See in particular pages 70 and 72 of Fortune’s Formula.
Poundstone also suggests that the Kelly System avoids the economist’s necessity of specifying investor
utility functions; see pages 223-224.
January 22, 2007
Hi All,
The next meeting of the Society’s PDDARI Task Force occurs at:
Tuesday January 23rd at 12:45 CST (1:45 EST, 10:45 PST)
The meeting will be held at the CFA Society of Chicago’s offices - 134 N. La Salle Drive,
Suite 1740.
Attending by phone. The dial in is 866-325-4310, and the password is 265-778-9101
For future planning, these meetings occur the fourth Tuesday each month, following the
Education Group meeting which begins at 12 Noon.
Agenda
1.
Status Reports – Abstract added to Initiatives; Please read other red-lined changes;
obtaining permission for data from institutions taken off critical path (Paul Kaplan’s
suggestion)
a.
Paul Kaplan report on risk initiative – Risk Adjusted Ranking in a Non
Mean-Variance World and Cross Sectional Risk / Return Measurement of
Portfolio Results over an Internal of Time in a Non Mean-Variance World;
discussion
b.
Rawley Thomas and Ralph Goldsticker - Investment Strategies
Across Global Asset Classes; David Hightower willing to contribute
commodity data; Ralph Goldsticker willing to contribute country index
data for long short portfolios; Ralph and Rawley discussed illustrating
Cupola Stable Risk Reduction analysis with 70 permutations of four long
and four short countries; discussion
c. Mike Lindh report on Fundamental Indexation; discussion
d. Amit Dugar and Ralph Goldsticker report on multi-factor models; Paul
Kaplan suggested factor attribution analysis to cross sectional risk /
return measurement of portfolio results; discussion
e.
Rawley Thomas report on DCF; Invited competitors to join the
Research Initiative Process – CSFB HOLT, AFG, Ativo, Stern Stewart,
Valu-Trac, Morgan Stanley (no responses yet)
f.
Lee Hayes Liaison with Society Technology Group – Updating Task
Force Initiatives
g. Mike Lindh and Rawley Thomas CFA Society of Nebraska and other
Midwest Societies
h. Institutions willing to contribute data; Data Working Group – volunteers,
recruiting additional volunteers, data format, automation of analytical
capability ; asked Adam Cohen of Zacks about the possibility of obtaining
permission from brokerage firms to include Barron’s performance data
i.
Discussion of next Initiatives; Additions; Volunteers to draft (Time
permitting)
j.
Does anyone work on derivatives and have an interest in eliminating the systematic
bias called the “volatility smile” in option pricing?
2. Rawley Thomas - Status of FMA Practitioner Research Committee
a. Committee Formed
i. Amy Edwards – SEC
ii. John Finnerty – Professor at Fordham University; written articles on
executive stock options; expert witness in valuation cases
iii. Jack Rader – Executive Director of the FMA (ex-officio, non-voting)
iv. Mike Riley, former CFO of UAL and Postal Service; Professor at U of
Maryland
v. David Walker – Professor at Georgetown University; former Trustee for
the Financial Management Association
vi. Ralph Walkling – President of FMA; Professor at Drexel University (exb.
c.
officio, non-voting)
Process under review
i. Role of Committee may change – Committee may facilitate establishing
relationship between practitioner thought partners and academics, instead of
formally approving practitioner requests for proposal submitted and
academic proposals submitted. Consequently, the Practitioner Thought
Partners may choose the academic proposal(s) they like with any help from
the Committee which they seek. This is more of a free market system.
However, the Committee is most willing to act as a filter so the best
academic proposals are forwarded to practitioner thought partners for their
review.
ii. How best to engage top academics in the effort – is publishing sufficient
to compete against consulting income? One important principle – avoid
being too directive on the research design and measurement methodologies
– see revisions to requests for proposals.
iii. Some top scholarly journals require complete replication of data and
algorithms, which directly conflicts with practitioner intellectual property
rights; other outlets and alternatives to full replication under exploration. For
some publications, making the data, but not the algorithms, may be
sufficient.
Other professional associations contacted – some of these, like risk, affect the
investment community
i. Society of Utility Regulatory Financial Analysts (SURFA) –
President Pauline Ahern Supportive, FMA member Ted Wood of
Southwest Gas producing initial list of topics – owner of the
process
ii. Conference Board of Canada – attending brain storming session
with Strategic Risk Council on Enterprise Risk Management (ERM)
on April 5th, including some academics; Karen Schoening-Thiessen,
Conference Board Senior Research Associate, owns the process
iii. Investment Management Consultants Association – contacts
made; process and Society proposals on risk sent; waiting for
more discussion with Debbie Nochlin, Managing Editor of The
Journal of Investment Consulting
iv. Received Tom Copeland’s suggested topics on corporate needs;
passed those along to Mike Riley
v. I sense Professional Associations are often interested in large
research initiatives addressing difficult practitioner decisions, NOT
Tiny Topics
Rawley Thomas
President and Co-Founder
LifeCycle Returns, Inc. (LCRT) (The "T" in HOLT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com
P.S. Of current relevance to our risk topics and portfolio construction, Bill Miller says in the just
published CFA Institute Global Perspectives on Investment Management: Leaning from the
Leaders, “Money Management involves knowing how much you commit to a position. Will it be 1
percent, 5 percent, 10 percent? I recommend the book Fortune’s Formula: The Untold Story of
Scientific Betting System that Beat the Casinos and Wall Street (by William Poundstone). It is a
far better way of thinking about asset allocation than mean-variance analysis.”
From: Rawley Thomas [mailto:Rawley@LCRT.com]
Sent: Sunday, November 26, 2006 5:32 PM
To: Warren Isabelle; Adam Cohen; Amit Dugar; Amit Dugar; Bob Atra; Greg Jania; Jack Rader;
Jeff Nevins; Jill Epstein; jim@jlgresearch.com; Joe Simpson; Lee Hayes; Mark Hooker; Mike
Lindh; Mike Wolcott; Nadia Van Dalen; Paul Kaplan; Goldsticker Ralph; Ronald Ewing; Russell E.
Long; Shantal Alonso; Tony Rossitto
Subject: FW: CFA Education Advisory Group and Research Group Meeting CHANGED to Monday,
December 4
Hi All,
1.
The CFA Research Group meeting has been postponed to
Monday, December 4 at 12:30 to 1:30 Central Time (10:30
West Coast Time; 1:30 East Coast Time) The Education Group
meets from 12 Noon to 12:30.
2.
The meeting will occur at the CFA Society of Chicago Offices 134 N.
LaSalle Dr. Suite 1740 Chicago, IL 60602.
3.
To join by phone, please dial 1-866-325-4310 Pass code #:
265-778-9101
4.
Agenda
a.
Discussion of full disclosure, cleansing, and multiple thought
partners where the APPEARANCE or reality of any conflict of
interest exists. (Background discussion:
www.lcrt.com/Updates/ConflictsOfInterest.doc)
i. Require full disclosure early on.
ii. Cleanse Research Initiatives of commercial interests
as much as practically possible, but do not forgo thought
partner new concepts, relevant research, useful
illustrations, or important experience.
iii. Where the APPEARANCE or reality of any conflict of
interest exists, involve multiple thought partners with
conflicting interests to select and define the Research
Initiatives.
b.
c.
d.
e.
f.
g.
h.
i.
Rawley Thomas - Status of FMA Practitioner Research
Committee – Committee formed; to meet in December;
questions?
Paul Kaplan report on risk initiative – Risk Adjusted Ranking in
a Non Mean-Variance World and Cross Sectional Risk / Return
Measurement of Portfolio Results over an Internal of Time in a
Non Mean-Variance World; discussion
Rawley Thomas - New Initiative on Investment Strategies
Across Global Asset Classes (I took the liberty of asking Ralph
Goldsticker of Mellon Bank and Tony Rossitto of Bank of
America to consider becoming thought partners on this
Initiative); discussion
Mike Lindh report on Fundamental Indexation; discussion
Amit Dugar and Ralph Goldsticker report on multi-factor
models; discussion
Rawley Thomas report on DCF; Invited competitors to join
the Research Initiative Process – CSFB HOLT, AFG, Ativo, Stern
Stewart, Valu-Trac, Morgan Stanley (no response yet);
discussion
Institutions willing to contribute data; Data Working Group –
volunteers, recruiting additional volunteers, data format,
automation of analytical capability
Discussion of next Initiatives; Additions; Volunteers to draft
(Time permitting)
I look forward to seeing or hearing you all there.
Rawley Thomas
President and Co-Founder
LifeCycle Returns, Inc. (LCRT) (The "T" in HOLT)
7N238 Barb Hill Drive
Saint Charles, IL 60175-6804
630-377-0761
630-377-2191 FAX
708-404-0761 Mobile
Rawley@LCRT.com
http://www.LCRT.com