U.S. patent application number 13/163438 was filed with the patent office on 2011-12-08 for stock method for measuring and assigning precise meaning to market sentiment.
Invention is credited to Reginald Nosegbe.
Application Number | 20110302106 13/163438 |
Document ID | / |
Family ID | 39733844 |
Filed Date | 2011-12-08 |
United States Patent
Application |
20110302106 |
Kind Code |
A1 |
Nosegbe; Reginald |
December 8, 2011 |
STOCK METHOD FOR MEASURING AND ASSIGNING PRECISE MEANING TO MARKET
SENTIMENT
Abstract
A stock method for objectively quantifying the feeling, or
market sentiment, of a company's stock (or the market as a whole)
in a data-driven and transparent manner that serves as a
standardized tool useful to investors and stock market analysts in
gauging such items as inflated or deflated price values resulting
from varying levels of market sentiment.
Inventors: |
Nosegbe; Reginald;
(Leesburg, VA) |
Family ID: |
39733844 |
Appl. No.: |
13/163438 |
Filed: |
June 17, 2011 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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11680877 |
Mar 1, 2007 |
7966241 |
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13163438 |
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Current U.S.
Class: |
705/36R |
Current CPC
Class: |
G06Q 40/00 20130101;
G06Q 40/06 20130101 |
Class at
Publication: |
705/36.R |
International
Class: |
G06Q 40/00 20060101
G06Q040/00 |
Claims
1. A method for understanding a stock price for a company,
comprising: obtaining data pertaining to the company; calculating a
Sentiment Index for the stock price; and calculating a Sentiment
Quotient for the stock price; making an investment decision based
on the Sentiment Quotient.
2. The method of claim 1, wherein said obtaining data pertaining to
the company is operating information available about the
company.
3. The method of claim 1, wherein said calculating a Sentiment
Index for the stock price is multiplying the price per share and
rate of return minus the earnings per share and divided by price
per share.
4. The method of claim 1, wherein said calculating a Sentiment
Quotient for the stock price is S q = .intg. 0 S i 1 ( s i + 1 ) 2
s i . ##EQU00005##
5. The method of claim 2, wherein said calculating a Sentiment
Index for the stock price is multiplying the price per share and
rate of return minus the earnings per share and divided by price
per share.
6. The method of claim 2, wherein said calculating a Sentiment
Quotient for the stock price is S q = .intg. 0 S i 1 ( s i + 1 ) 2
s i . ##EQU00006##
7. The method of claim 3, wherein said calculating a sentiment
quotient for the stock price is S q = .intg. 0 S i 1 ( s i + 1 ) 2
s i . ##EQU00007##
8. The method of claim 1, further comprising graphing the Sentiment
Index versus the Sentiment Quotient.
9. The method of claim 2, further comprising graphing the Sentiment
Index versus the Sentiment Quotient.
10. The method of claim 3, further comprising graphing the
Sentiment Index versus the Sentiment Quotient.
11. The method of claim 4, further comprising graphing the
Sentiment Index versus the Sentiment Quotient.
12. The method of claim 5, further comprising graphing the
Sentiment Index versus the Sentiment Quotient.
13. The method of claim 6, further comprising graphing the
Sentiment Index versus the Sentiment Quotient.
14. The method of claim 7, further comprising graphing the
Sentiment Index versus the Sentiment Quotient.
15. The method of claim 1, further comprising determining the
Sentiment Quotient versus time.
16. The method of claim 2, further comprising determining the
sentiment quotient versus time.
17. The method of claim 3, further comprising determining the
sentiment quotient versus time.
18. The method of claim 4, further comprising determining the
Sentiment Quotient versus time.
19. The method of claim 8, further comprising determining the
Sentiment Quotient versus time.
20. A method for understanding a stock price for a company,
comprising: obtaining data pertaining to the company; calculating a
Sentiment Index for the stock price; calculating a Sentiment
Quotient for the stock price; wherein said obtaining data
pertaining to the company is operating information available about
the company; wherein said calculating a Sentiment Index for the
stock price is multiplying the price per share and rate of return
minus the earnings per share and divided by price per share.
wherein said calculating a Sentiment Quotient for the stock price S
q = .intg. 0 S i 1 ( s i + 1 ) 2 s i ; ##EQU00008## and making an
investment decision based on the Sentiment Quotient.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This application is a continuation of U.S. patent
application Ser. No. 11/680,877, filed Mar. 1, 2007, which is
hereby incorporated by reference herein in its entirety.
FIELD OF THE INVENTION
[0002] The present invention relates to a standard quantification
method for assigning precise meaning to the feeling, or market
sentiment, of company stocks and the stock market as a whole. More
specifically, the present invention works by calculating such
elements as a Sentiment Index and Sentiment Quotient, as well as
applies these items to various embodiments such as the Market
Sentiment Curve, so that the overall sentiment of a stock in
relation to price valuation and other factors can ultimately be
objectively quantified in a standardized and transparent
manner.
BACKGROUND OF THE INVENTION
[0003] The stock market is often a rough and tumble world full of
volatility and intrigue. The stock market is deeply intertwined
with the national and international economic structure. On the
individual investor level, people's hopes and dreams can rise and
fall along with the unpredictable directions of the stock market.
For this reason, corporations and individuals alike pay enormous
sums of money to try and gain an edge in maximizing profits through
the stock market. As a result, numerous people are tasked with the
job of trying to figure out which way the market will turn for
individual stocks on the market. A number of ideas and strategies
have been funneled into the process of helping investors determine
the various scenarios surrounding their stocks. But in the end,
these same practitioners are basically involved in what amounts to
a high-stakes guessing game. In fact, since the Industrial
Revolution, the ability of the average investor and other market
participants to predict the vast idiosyncrasies of the stock market
has largely been driven by speculation. Numerous attempts and tools
have been adopted over the years to better predict what stocks will
do, but to date, there has been no reliable indicator to predict
the rise and fall that goes along with the stock market. Over the
last 100 years, the U.S. capital market has experienced nine
crashes greater in magnitude than the catastrophic market crash of
2000/2002. These market failures have been occasioned by what the
Federal Reserve Chairman, Alan Greenspan, called "Irrational
Exuberance".sup.1 and other market practitioners called speculative
bubble. The expression of one's subjective feeling that the market
is driven by speculation has not been sufficient to protect
investors. Prevailing theories--the Modern Portfolio Theory, the
Efficient Market Hypothesis, etc--that underlie the discipline and
the practice of finance, and the workings of capital markets are no
longer tenable; they neither explain the behavior of markets nor do
they provide information necessary for investors to make informed
and sound investment decisions. These theories proved useless to
investors when the broadest indicators of a diversified market lost
vast percentages. Investors lost "70%, 90%, even in some cases all
of their holdings".sup.2. A crash of this magnitude is not an
aberration; it is a pattern that has robbed millions of individuals
of their life's savings for over a century. The methods, processes,
and tools that this invention embodies make a contribution to
solving this problem by making available standardized and objective
metrics and methods for quantifying and measuring market sentiment.
.sup.1http://www.federalreserve.gov/BOARDDOCS/SPEECHES/19961205.htm..sup.-
2Fortune Magazine, Sep. 2, 2002, "You Bought, They Sold"
[0004] Information gap which increases the risk and volatility of
the capital market is another problem that the present invention is
designed to make a contribution to solving. A large percentage of
the more than 10,000 companies traded on the U.S. stock market
alone are not followed by analysts. The lack of analysts
researching these stocks presents a gap in reliable information
that investors need in order to make informed investment decisions.
The present invention satisfies these needs by providing an
efficient method of filling the gap with information on the market
valuation of stocks. With a tool for quickly and consistently
quantifying the portion of a company's stock that is attributable
to market sentiment in the hands of investors, they can effectively
place demands on research analysts to produce specific research
information that supports or justifies the market valuation of
companies traded on the exchanges. For example, armed with
information on the value of the portion of the company's stock that
is attributable to market sentiment, investors can demand directly
from a company's management information (financial, operations or
market) that supports the company's valuation. Also, if the company
does not satisfy requesters' demand for information regarding
possession of competitive advantage enabling it to sustain (for
example) an above average Sentiment Quotient, then market
participants' demand for the company stock will fall. In that
event, a reduction in the demand for a company stock will have the
effect of occasioning a drop in the price of the stock; a drop in
the price of the stock will have an effect of reducing the risks
associated with a stock market driven by speculative Bubble or
Exuberance.
[0005] The metrics, processes, methods, and tools embodied in the
present invention provide a new approach for investors to gain
transparency and insight into the market pricing of stocks. Instead
of pure speculative or otherwise traditional attempts at market
analysis to solving the intractable problem of market failure,
there is a need for a multi-disciplinary approach toward the stock
market--one that employs elements of accounting, finance, risk
management, humanitarianism combined with the discipline of systems
and information engineering. The methods introduced by the present
invention satisfy the needs of market participants by making
available to society standardized, quantitative benchmarks, and
tools that have the utility of transforming the behavior and
improving the performance of capital markets in the U.S. and across
the world.
[0006] U.S. Pat. No. 6,415,268 issued to Korisch on Jul. 2, 2002,
is a method attempting to determine the "real" value of a stock by
dividing certain stock pricing data into two components. This
method specifically involves an analysis of the "real value of the
stock" along with a random function of time, which is referred to
in that method as the "noise wave of a stock." Unlike the present
invention, the method as created by Korisch does not delve into a
standardized indicator and measurement of market sentiment, but
instead relies on less in-depth and more typical items as the
short-term fluctuations that can be attributed to such elements as
short-term investors.
[0007] U.S. Pat. No. 6,832,211 issued to Thomas et al on Dec. 14,
2004, is a method that relies on such tangible indicators as
related to technology-based elements. Unlike the present invention,
this method as created by Thomas et al relies almost exclusively on
such technology-based valuation indicators as scientific research
by the company in question, as well as the speed at which this
company innovates and research and development links. The very
nature of this method differs from the present invention because of
the limits on what type of company stock values can be applied
based on the technology-based indication focus.
[0008] US 2002/0073017 published on Jun. 13, 2002, invented by
Robertson, is a method that seeks to employ historical data related
to a particular stock in order to rapidly analyze the trading
potential. Unlike the present invention, this method does not delve
into the area of market sentiment and instead relies on traditional
information revolving around the actual history of the stock to
present two graphical displays.
[0009] US 2002/0116310A1 published on Aug. 22, 2002, invented by
Cohen et al, is a method that utilizes a scoring technique to
ultimately engage in an unlimited number of comparative stock
analysis. Unlike the present invention, this method is primarily
functioned to aid investors by customizing scoring criteria for
each stock portfolio in an effort to score the comparisons between
differing stocks rather than an analysis capability for one
specific company stock. This method also does not take into account
market sentiment in its comparative analysis.
[0010] US 2003/0135445 published on Jul. 17, 2003, invented by Herz
et al, is a method seeking to aid investors in predicting elements
of company stocks by using "natural language processing" to extract
company information from various online news sources. Unlike the
present invention, this method does not delve into actual market
sentiment and related indicators directly relevant to the stock
price, but instead literally takes information from online mediums
to predict the stock market. This method differs from the present
invention in many ways, including the fact that, unlike the present
invention, this method relies solely on online media coverage to
make its predictions.
[0011] US 2004/40133496 published on Jul. 8, 2004, invented by
Hedquist, is a method seeking to determine the health of both the
stock market and individual company stocks. Unlike the present
invention, this method relies on such items as closing price
compared to short and long-term moving averages to quantify a
health score for the market.
[0012] US 20050086150 published on Apr. 21, 2005, invented by
Serpico et al, is a method that creates an algorithm in an attempt
to make a veritable point system acting as filters to either
encourage or discourage actions regarding various company stocks.
Unlike the present invention, this method attempts to employ a
three-pronged filter system related to certain technical indicators
as opposed to such elements of the present invention including a
Market Sentiment Curve.
[0013] While there are plenty of methods out there attempting to
aid investors in navigating the stock market, none of them
satisfies the need for a standard, precise meaning to market
sentiment as associated with the present invention. None of these
previous methods permit an investor or analyst to study the
intensity of market sentiment on a company stock in an objective
and standardized way as the methods of this invention enable. Such
methods that are included in the present invention as the Market
Sentiment Curve, along with the Sentiment Index, and Sentiment
Quotient, all are combined into a unique approach designed to
ultimately improve and make accessible quantifiable methodology to
benefit investors.
[0014] As mentioned above, the stock market is a volatile and
unpredictable element of society that faces such related issues as
bubble, euphoria, psychology, sentiment and even "irrational
exuberance" as quoted by former Federal Reserve Chairman Alan
Greenspan. In addition, previous methods have failed to
specifically address the problem of market valuation of company
stock in regard to portions that are not explained by the current
operating performance and associated risks of various companies.
Nothing out there allows investors the opportunity to use
information about a company stock in order to determine the
feeling, or market sentiment, surrounding that stock in an
analytical, standardized, objective way as the methods that this
invention do. The methods as prescribed in the present invention
satisfies that need by providing standard quantifications that can
be used as a tool to ultimately support determinations of price
valuation relating to market sentiment. A standard, complete method
designed to assign precise meaning to the market sentiment of the
stock market is not only needed, but also necessary for those who
risk their finances in the stock market as well as for those who
desire transparency and strategy.
SUMMARY OF THE INVENTION
[0015] The present invention relates to a standard quantification
method for assigning precise meaning to the feeling, or market
sentiment, of company stocks and the stock market as a whole. More
specifically, the present invention works by calculating such
elements as a Sentiment Index and Sentiment Quotient so that the
intensity and overall sentiment of a stock in relation to
transparent price valuation and other factors can ultimately be
studied through an interface called Market Sentiment Curve.
[0016] The present invention provides objective standards, methods,
and processes, and an interface--the Market Sentiment Curve--for
quantifying and assigning precised meaning to the feeling, or
market sentiment, of company stocks and the stock market as a
whole. The invention utilizes various indicators to ultimately
produce an objective and systematic quantification of the portion
of a company's market valuation that is derived from market
sentiment, or the feelings and expectations of market participants.
It also includes an additional embodiment for standardizing the
process of quantifying and classifying the market valuation of a
company or the market as a whole as "Bubble," "Exuberant," or
"Lethargic." The present invention derives a number of new metrics
for quantifying and measuring market sentiment, including 1.
Sentiment Index (Si), 2. Sentiment Quotient (Sq), and 3. Change in
Sentiment Quotient (S.sub.q.DELTA.). Additionally, items such as
price per share, expected return and earnings per share are
integral to the methods of the present invention. Together, these
metrics objectively quantify and measure the portion of the market
value (stock price) of a company (or the market as a whole) that is
driven by speculations, not a company's current operating
performance.
[0017] These metrics and methods of the present invention all serve
in part to enable investors and others involved in the stock market
to make informed decisions within the confines of a standardized,
objective, transparent and all-encompassing informational approach.
In short, the present invention takes a number of factors into
account and quantifies them into standard metrics. These
calculations are then graphed on a logistic curve--The Market
Sentiment Curve--so that the feeling, or sentiment, surrounding the
stock market or individual stock is depicted. Once a point is
plotted based on the Sentiment Index for the graph's horizontal
axis and the Sentiment Quotient for the vertical axis, the
intensity of market sentiment relating to a stock can be studied.
The numbers gleaned from this method can provide standardized
results that could serve as an objective basis for the analysis of
such items as price valuation and price inflation or deflation due
to high or low sentiment or feeling.
[0018] In addition, the indicators of the present invention provide
a method of understanding and interpreting the market value of
company stocks. The Market Sentiment Curve is a key element of the
present invention. The Market Sentiment Curve is designed to
quickly interpret the valuation indicators and ultimately make them
available to investors. Plotting the coordinate of the Sentiment
Index and the Sentiment Quotient derives the Market Sentiment
Curve. In essence, the points on the Market Sentiment Curve can be
plotted on a minute-by-minute basis, year-to-year or any other time
frame that best fits the needs of the individual investor or
analyst.
[0019] The present invention has various items that serve to obtain
useful elements relating to market sentiment. Again, this includes
price per share, rate of return and earning per share among other
factors. These indicators then can be used to determine the
Sentiment Index. The Sentiment Index is a standardized indicator
and measure of market sentiment toward a company's stock market
price. In addition, the market value partitioning factor, here
known as the Sentiment Quotient, is a standardized measure of the
portion of a company's stock market price that is attributable to
market sentiment.
[0020] Once the calculations of each of these items are made, the
results relating to the Sentiment Index and Sentiment Quotient can
be used to study the sentiment of the stock. As noted above, the
Sentiment Index is plotted using the horizontal axis and the
Sentiment Quotient is plotted using the vertical axis. Based on the
results and course of time, a curve will appear on the graph. This
curve is used to visually display a quantification of the feeling,
or market sentiment, surrounding stocks on the stock market.
Investors and others involved in the stock market can then use the
graph and results of the present invention to understand the
feeling surrounding a company stock instead of merely relying on
typical intangibles. The points on the graph based on the results
gained from the Sentiment Index and Sentiment Quotient indicates
the intensity of the market sentiment. In general, a lukewarm
result may indicate to an investor that a company stock price has
good percentage of value in its price due to the lack of inflation
attributed to market sentiment. Conversely, a high result could
reveal that the price value of a stock is inflated due to strong
feelings associated to the stock. The present invention is designed
to quantify and standardize this vital aspect to better assist
investors, analysts and anyone else associated with the stock
market.
[0021] The metrics and methods that the present invention embodies
are designed to be applied to the stock market as a whole, market
sectors, industries, and individual securities traded on stock
exchanges in the United States and other capital markets across the
world. The present invention derives the following metrics for
quantifying and measuring market sentiment: 1) Sentiment Index
(Si), 2) Sentiment Quotient (Sq), and 3) Change in Sentiment
Quotient (S.sub.q.DELTA.). Together, these metrics objectively
standardize the process for quantifying and measuring the portion
of the market value (stock price) of a company (or the market as a
whole) that is driven by speculations, not a company's current
operating performance.
[0022] The mathematical formulas for the present invention provide
a method to ultimately standardize the process for quantifying and
the measuring market sentiment through such embodiments as the
Market Sentiment Curve.
[0023] Below is the mathematical formulation of Sentiment Index at
a point in time:
S i = Pps .times. r - Eps Eps ##EQU00001##
[0024] Below is the mathematical formulation of the Sentiment
Quotient at a point in time:
S q = .intg. 0 S i 1 ( s i + 1 ) 2 s i ##EQU00002##
[0025] Below is the mathematical formulation of the Change in
Sentiment Quotient over time:
S q .DELTA. = .intg. S i ( TimeA ) S i ( Time B ) 1 ( s i + 1 ) 2 s
i ##EQU00003##
[0026] The metrics of the present invention also include
mathematical formulas that ultimately lead to various algorithms
that can be applied to additional embodiments of the present
invention.
Bubble = [ ( PPS .times. r - Eps Eps ) > ( Profit .DELTA. YtoY )
] AND [ .intg. 0 S i 1 ( s i + 1 ) 2 s i >= 0.5 ] Formula 1
Exuberant = [ ( PPS .times. r - Eps Eps ) > ( Profit .DELTA.
YtoY ) ] AND [ .intg. 0 S i 1 ( s i + 1 ) 2 s i >= 0 ] Formula 2
Lethagic = [ ( PPS .times. r - Eps Eps ) < ( Profit .DELTA. YtoY
) ] AND [ .intg. 0 S i 1 ( s i + 1 ) 2 s i < 0 ] Formula 3
##EQU00004##
Where
[0027] PPS=Price per Share. The method obtains PPS (Price per
Share) from publicly available market data. [0028] EPS=Earning Per
Share. The method uses available EPS (Earning per Share) data
provided by audited financial statements, under Generally
Acceptable Accounting Principal Standards. [0029] r=Expected
Return. The Capital Asset Pricing Model provides a method for
calculating "r": r=r.sub.f+.beta.(m.sub.r-r.sub.f).sup.3
.sup.3William Sharpe (1964) published the capital asset pricing
model (CAPM). Parallel work also was performed by Treynor (1961)
and Lintner (1965). CAPM extended Harry Markowitz's portfolio
theory to introduce the notions of systematic and specific risk.
For his work on CAPM, Sharpe shared the 1990 Nobel Prize in
Economics with Harry Markowitz and Merton Miller
http://www.riskglossary.com/link/capital_asset_pricing_model.htm
[0030] Where: [0031] r.sub.f=risk free premium (t-bill rate);
[0032] m.sub.r=average market return [0033] .beta.=Beta (a measure
of systematic risk of a stock);
[0033] .beta.=COV(i.sub.s,i.sub.m)/.sigma..sub.m.sup.2 [0034]
Where: COV (i.sub.s, i.sub.m)=Covariance between stock return, and
market return .sigma..sub.m=Standard deviation of systematic return
[0035] Profit.DELTA.YtoY=Percent change in Corporate Profit over a
year
[0036] The Sentiment Index is an objective, quantifiable method for
categorizing the market's sentiment towards a company as positive,
negative or neutral at a point in time. The Sentiment Index also
standardizes and quantifies the market's sentiment or expectation
of increase in a company's operating performance (profit) built
into a company's stock market value at a point in time. The
Sentiment Index provides an input to the calculation of the
Sentiment Quotient associated with the market valuation of a stock
at a point in time
[0037] The Sentiment Quotient is a standardized metrics for
objectively quantifying the fraction of a stock's price that is
attributable to market sentiment or quantifying the sentiment value
that the market associates with a company's stock price at a point
in time. Meanwhile, the Sentiment Quotient Delta measures change in
company's (or the market as a whole, sector, etc) sentiment value
that the market associates with a company's stock price over time.
It is used to performed historical and trend analysis.
[0038] An additional embodiment of this invention is the
standardization and classification of individual stocks or the
market as a whole as "Bubble," "Exuberant," or "Lethargic." The
present invention uses the metrics described above to develop
algorithms that: [0039] Classifies the market valuation of a stock
(the market as a whole, Sector, Industry, or portfolios) as
"Bubble," "Exuberant," or "Lethargic" [0040] Assigns appropriate
color code
[0041] Below are the algorithms that the present invention uses to
automate the classification process: [0042] If a company's
Sentiment Index at a point in time is greater than the company's
actual percent increase in profit over a year AND the company's
Sentiment Quotient is greater than 0.5 than the method classifies
the market valuation of the company's stock as "Bubble" and assigns
a color code of "Red." [0043] If a company's Sentiment Index at a
point in time is greater than the company's actual percent increase
in profit over a year AND the company's Sentiment Quotient is
greater than 0, than the method classifies the market valuation of
the company's stock as "Exuberant" and assigns a color code of
"Yellow." [0044] If a company's Sentiment Index at a point in time
is less than the company's actual percent increase in profit over a
year AND the company's Sentiment Quotient is less than 0, than the
method classifies the market valuation of the company's stock as
"Lethargic" and assigns a color code of "Green."
BRIEF DESCRIPTION OF THE DRAWINGS
[0045] FIG. 1 is a general view of a Market Sentiment Curve as
applied to the present invention.
[0046] FIG. 2 is a table relating to an additional embodiment of
the present invention
[0047] FIG. 3 is an embodiment of the Market Sentiment Curve as
applied to the present invention pertaining to an example using
MICROSOFT.TM. stock.
[0048] FIG. 4 is an embodiment of the Market Sentiment Curve as
applied to the present invention pertaining to an example using
MOVADO.TM. stock.
[0049] FIG. 5 is an embodiment of the Market Sentiment Curve as
applied to the present invention pertaining to an example using
FANNIE MAE.TM. stock.
[0050] FIG. 6 is an embodiment of the Market Sentiment Curve as
applied to the present invention pertaining to an example using
TOLL BROTHERS.TM. stock.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT(S)
[0051] FIG. 1 shows a graph of the Market Sentiment Curve of the
present invention. The Market Sentiment Curve is derived from the
accumulation of various elements of data. This information is
gleaned from items related to the company stock such as price per
share, earnings per share, risk and rate of returns. All of the
information is brought together into quantifiable formulas, all
relating to differing areas of feeling, or market sentiment. From
there, a market sentiment index is derived. After the market
Sentiment Index is calculated, the number pertaining to the
Sentiment Quotient is derived. Once these elements are worked out,
the results are applied to the graph. The primary element of the
present invention relates to the Sentiment Quotient and the
Sentiment Index. As seen in FIG. 1, the Sentiment Quotient is
charted by the vertical axis and the sentiment index is charted by
the horizontal axis. These two elements of the present invention
are then plotted onto the graph. The Market Sentiment Curve can
then be studied and continuously plotted based on the individual
needs of the investor or analyst.
[0052] Whether it is part of the Market Sentiment Curve or simply
to achieve the actual number for analysis, the Sentiment Index and
Sentiment Quotient contribute greatly to the method of the present
invention. The Sentiment Index is an indicator of the portion of a
company's stock price that is attributable to market sentiment. The
Sentiment Index is used to provide an objective indication and
standard measure of various states of market feeling or sentiment
toward a particular company stock. Such states of market sentiment
include positive/optimistic feelings, neutral or
negative/pessimistic feelings. As mentioned above, the sentiment
index is comprised of many tangible factors such as price per share
and earnings per share.
[0053] Meanwhile, the Sentiment Quotient can also be regarded as a
market value partitioning factor. The Sentiment Quotient is
integral to the present invention in that it essentially is a
quantification of a portion of a company's market value that is
attributed to market psychology or general feeling or sentiment.
The sentiment quotient is used in conjunction with the Sentiment
Index to ultimately establish a standard, transparent and
meaningful tool as prescribed by the present invention. Most
importantly, the graphing or table representation of the sentiment
index versus the sentiment quotient, especially over time, is a
subject of the present invention.
[0054] The elements of the present invention and resulting Market
Sentiment Curve all serve to quantify the overall feeling of
company stocks. This feeling, known as market sentiment, provides
investors and others involved in the stock market with a standard,
quantifiable method from which to make their investment decisions
or even to merely gain information on the company stock or market
in general. Basically, the numbers derived into the Market
Sentiment Curve can be used to make an educated, tangible
investment decision.
[0055] When determining the Market Sentiment Curve, the first step
when dealing with a particular company stock is to calculate the
Sentiment Index. That point will be plotted through the horizontal
axis. The Sentiment Quotient will then be derived and plotted on
the vertical axis. Once the company stock is plotted on the graph,
that positioning will enable the investor to learn a great deal
about the price of the stock. In addition, these points can be
plotted on a minute-to-minute basis or month-to-month depending on
the needs of the investor. This makes the present invention viable
to a day trader as much as for a market analyst or traditional
investor.
[0056] When studying the resultant Market Sentiment Curve as shown
in FIG. 1, an investor can learn about the intensity of positive or
negative feelings surrounding a company stock. As the graph in FIG.
1 indicates, a Sentiment Quotient around -0.25 can be considered to
have somewhat negative feelings or sentiment. But over the course
of time if we assume the market reaction value curve followed the
example in FIG. 1, then we can see how the feelings or sentiment
continue to increase. This example tells us how an investor could
view the stock as a good buy with little value inflation due to
sentiment until it ultimately reaches a Sentiment Quotient of
around 0.80. At that point, the stock price could be deemed vastly
inflated in regard to sentiment and not such a good buy anymore in
terms of value. Investors and analysts can study the graph to make
these determinations.
[0057] In addition to the Market Sentiment Curve, investors and
others involved in the stock market are not limited to plotting and
graphing the results of the calculations. As seen in FIG. 2, the
present invention creates a standard quantification of market
sentiment through the Sentiment Index and Sentiment Quotient. FIG.
2 shows us a standard table of the present invention that can be
used similar to a common multiplication table one might recall from
elementary school math class. The table in FIG. 2 is an additional
embodiment of the present invention that features all potential
results derived from the calculations for the Sentiment Index and
Sentiment Quotient. Similar as is done in the market value reaction
curve as seen in FIG. 1, the table in FIG. 2 is used by locating
the Sentiment Index of a company stock and then locating the
corresponding Sentiment Quotient of that company stock. The table
in FIG. 2 then becomes an additional embodiment of the present
invention where it can be used to study the market sentiment of a
stock in relation to such items as price valuation and the
inflation and deflation of a company stock in direct relation to
market sentiment. It should be recognized that calculating a
Sentiment Index for the stock price is providing a number based on
the intensity of feeling that the user associates with a particular
stock.
[0058] While the user can use items such as that shown in FIG. 2,
the user also has other options in regard to further technological
and Web-based embodiments of the present invention as seen in FIG.
1. The present invention, as indicated in FIG. 1, shows how the
coordinate (the exact position) of a company's Sentiment Index and
its Sentiment Quotient lies on a logistic curve. The logistic
curve--Market Sentiment Curve--derived by plotting the Sentiment
Index and the Sentiment Quotient, is an interface of the present
invention developed to give the user a composite and simple device
for using the metrics and methods of the present invention to
quickly gain insights that would lead to a more informed investment
decision. To use this tool as shown in FIG. 1, the user can access
a web-based application; the user then would enter the ticker
symbol of the company of interest or click on a pull-down menu and
select the ticker symbol that he/she would like to gain insight
into. Valuation metrics associated with the ticker symbol selected
by the user is displayed on the Curve. The application that
supports the Market Sentiment Curve as shown in FIG. 1 of the
present invention has embedded in it the logic for accessing,
summarizing, and presenting the metrics described in the present
invention at the user's request. Web-based tools such as XML,
Web-services and agent applications can then enable the
application.
[0059] FIGS. 3, 4, 5 and 6 are additional embodiments of the
present invention. FIGS. 3, 4, 5 and 6 use the scenario below to
illustrate the utility of the valuation metric and Market Sentiment
Curve. The following is an example of additional embodiments of the
present invention applied to realistic, practical scenarios:
[0060] Assume that today is Jan. 6, 2006, and you are contemplating
making an investment in the following companies: MICROSOFT.TM.,
MOVADO.TM., FANNIE MAE.TM., and TOLL BROTHERS.TM.. You have a
feeling about the market valuation of these companies, but before
making a decision whether or not to buy these company stocks, you
would like to obtain analysis that is free of bias. You read the
financial press and analysts have different opinions about the
valuation and prospects of these companies. You need objective
information that would give you insight into the valuation of these
companies. Analyst reports, even if available, are expensive and in
some cases biased. You decide to use the valuation methods and
Market Sentiment Curve of the present invention to quickly analyze
these securities in order to make informed investment decision.
[0061] In regard to FIG. 3, you access the Market Sentiment Curve
over the Internet. You click on a pull-down menu on the Market
Sentiment Curve and select MICROSOFT's.TM. ticker symbol. The
following information appears on the curve: Price Per Share (Pps):
$26.92; Sentiment Index (Si): 1.65; Sentiment Quotient (Sq): 0.62
and profit growth over one year (Cp.DELTA.): 0.49. As these metrics
appear on the Curve, the following analysis and interpretation are
automatically displayed: [0062] A Sentiment Index of 1.65
indicating that the market's sentiment towards MICROSOFT.TM. is
POSITIVE. [0063] A Sentiment Index of 1.65 also means that priced
into MICROSOFT's.TM. stock is a market expectation that
MICROSOFT's.TM. operating performance (Profit) will increase by
165% over a year. [0064] A Sentiment Quotient of 0.65 means that
65% of the current stock price is derived from Market Sentiment.
[0065] MICROSOFT.TM. actual one year profit growth is 49% [0066]
Considering that the Si (1.65) is greater than its profit growth
(0.49) AND its Sq (0.62) is greater than 0.5, the current market
value is classified as BUBBLE and a color code of RED is
assigned.
[0067] Clicking on the buttons on the lower right hand corner of
the Market Sentiment Curve will give you the ability to view the
valuation metrics for the market as a whole, and the sector and
industry with which MICROSOFT.TM. is associated. The Market
Sentiment Curve also gives you the ability to do historical
analysis and gain insight from trend analysis. The application as
applied to the present invention automatically displays the
metrics, analysis, and classifications when you click on one of the
buttons.
[0068] Continuing this example onto the view in FIG. 4, you access
the Market Sentiment Curve over the Internet. You click on a
pull-down menu on the Curve and select MOVADO's.TM. ticker symbol.
The following information appears on the curve: Price Per Share
(Pps): $19.03; Sentiment Index (Si): 0.67; Sentiment Quotient (Sq):
0.40 and profit growth over one year (Cp.DELTA.): 0.116. As these
metrics appear on the Market Sentiment Curve, the following
analysis and interpretation are automatically displayed: [0069] A
Sentiment Index of 0.67 indicating that the market's sentiment
towards MOVADO.TM. is POSITIVE. [0070] A Sentiment Index of 0.67
also means that priced into MOVADO's.TM. stock is a market
expectation that MOVADO's.TM. operating performance (Profit) will
increase by 67% over a year. [0071] A Sentiment Quotient of 0.40
means that 40% of the company's current stock price is derived from
Market Sentiment. [0072] MOVADO.TM. actual one year profit growth
is 11.6% [0073] Considering that the company's Si (0.67) is greater
than its profit growth (0.116) AND its Sq (0.40) is greater than 0,
the current market value is classified as EXUBERANT and a color
code of YELLOW is assigned.
[0074] Clicking on the buttons on the lower right hand corner of
the Market Sentiment Curve will give you the ability to view the
valuation metrics for the market as a whole, and the sector and
industry with which MOVADO.TM. is associated. The Market Sentiment
Curve also gives you the ability to do historical analysis and gain
insight from trend analysis. The application automatically displays
the metrics, analysis, and classifications when you click on one of
the buttons.
[0075] In regard to FIG. 5, you may access the Market Sentiment
Curve over the Internet. You click on a pull-down menu on the Curve
and select FANNIE MAE.TM. ticker symbol. The following information
appears on the curve: Price Per Share (Pps): $53.80; Sentiment
Index (Si): -0.30; Sentiment Quotient (Sq): -0.43 and profit growth
over one year (Cp.DELTA.): 0.749. As these metrics appear on the
Market Sentiment Curve, the following analysis and interpretations
are automatically displayed: [0076] A Sentiment Index of -0.30
indicating that the market's sentiment toward the company is
NEGATIVE. [0077] A Sentiment Index of -0.30 also means that priced
into the company's stock is a market expectation that FANNIE
MAE's.TM. operating performance (Profit) will decrease by 30% over
a year. [0078] A Sentiment Quotient of -0.43 means that 43% of
Market Sentiment value is not reflected in the company's current
stock price. [0079] FANNIE MAE.TM. actual one year profit growth is
74.9% [0080] Considering that the company's Si (-0.30) is greater
than its profit growth (0.749) AND its Sq (-0.43) is less than 0,
the company's current market value is classified as LETHARGIC and a
color code of GREEN is assigned.
[0081] Clicking on the buttons on the lower right hand corner of
the Market Sentiment Curve will give you the ability to view the
valuation metrics for the market as a whole, and the sector and
industry with which the company is associated. The Market Sentiment
Curve also gives you the ability to do historical analysis and gain
insight from trend analysis. The application automatically displays
the metrics, analysis, and classifications when you click on one of
the buttons.
[0082] In regard to FIG. 6 of the present invention, you may access
the Market Sentiment Curve over the Internet. You click on a
pull-down menu on the Curve and select TOLL BROTHERS'.TM. ticker
symbol. The following information appears on the curve: Price Per
Share (Pps): $37.23; Sentiment Index (Si): -0.13; Sentiment
Quotient (Sq): -0.15 and profit growth over one year (Cp.DELTA.):
0.902. As these metrics appear on the Market Sentiment Curve, the
following analysis and interpretation are automatically displayed:
[0083] A Sentiment Index of -0.13 indicating that the market's
sentiment toward the company is NEGATIVE. [0084] A Sentiment Index
of -0.13 also means that priced into the company's stock is a
market expectation that TOLL BROTHERS'.TM. operating performance
(Profit) will decrease by 13% over a year. [0085] A Sentiment
Quotient of -0.15 means that 15% of Market Sentiment value is not
reflected in the company's current stock price. [0086] TOLL
BROTHERS.TM. actual one year profit growth is 90.2% [0087]
Considering that the company's Si (-0.13) is greater than its
profit growth (0.902) AND its Sq (-0.15) is less than 0, TOLL
BROTHERS'.TM. current market value is classified as LETHARGIC and a
color code of GREEN is assigned.
[0088] Clicking on the buttons on the lower right hand corner of
the Market Sentiment Curve will give you the ability to view the
valuation metrics for the market as a whole, and the sector and
industry with which the company is associated. The Market Sentiment
Curve also gives you the ability to do historical analysis and gain
insight from trend analysis. The application automatically displays
the metrics and analysis when you click on one of the buttons.
[0089] The present invention is not solely limited to the
embodiments described above, but is also all variations, as well as
those embodiments within the scope of the following claims.
* * * * *
References