In this issue:
I. Standard and Poor’s Andre Archambault
II. Legend Advisory’s Shashi Mehrotra
III. Fifty percent discount available on multiple copies
IV. Don’t let you emails to us get lost!
V. One way to stop this newsletter
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I. Standard and Poor’s Andre Archambault
Andre Archambault, BA, JD, MBA, is the Director of Quantitative Strategies at Standard and Poor’s Investment Services, and he is also the developer and genius behind Standard and Poor’s extremely popular Neural Fair Value (NFV) System for ranking stocks and building portfolios. NFV, which uses neural nets made with NeuroShell, is among the more popular features of Standard & Poor’s MarketScope, an electronic investment intelligence service for financial advisors, brokers, and money managers with approximately 77,000 subscribers worldwide.
After briefly practicing law in California, Andre focused his career on investments, moving to New York and starting work as a special situation analyst for a brokerage firm. After 2 years, he was brought to Chicago by the Continental Bank to work as an analyst/portfolio manager in its trust department. Seventeen years later, Andre left Continental to buy a seat on the CBOE. After about two years of making markets on the floor of the exchange, Andre yearned to return to the more traditional investment world where his long term planning abilities served him best. He accepted an offer by Standard & Poor’s to return to New York and head MarketScope’s research department.
Andre Archambault purchased his first copy of NeuroShell in 1993, and has purchased just about everything we have sold since then. “NeuroShell is a great program,” he says, “and one of the essential reasons for the success of NFV portfolios. It has been a real performance booster to the original Fair Value System.”
The Fair Value system started in 1995, but Andre decided to boost its performance with neural networks in 1999. After a year of work preprocessing data and evaluating inputs, the Neural Fair Value system was introduced at the end of September 2000. The idea was to pick the best performing stocks for a portfolio in which the subscriber was always invested. The first NFV-based portfolio — called NFV20, as it always held exactly 20 stocks — became incredibly popular among MarketScope’s subscriber base, and has become the basis for S&P’s model portfolio management. NFV20, from the end of October 2000 to the end of April 2005, had a compounded annual growth rate of 10.9%, compared to -4.6% for the S&P 500 index. A portfolio of $10,000 invested in 9/31/2000 would now be worth $16,253 – pretty good, especially considering how the market as a whole has been during those years.
NFV20 was replaced on MarketScope by a 25-stock portfolio, the NFV25, on October 5, 2004. Since then to the end of April 2005, NFV25 is up 10.41% compared to the S&P 500 index itself, which is up only 1.97%. S&P has developed several other NFV model portfolios that, like NFV20, are used to manage the portfolios of major institutional investors.
Here is how Andre describes NFV25:
“The Neural Fair Value 25 Portfolio, a quantitative model proprietary to Standard & Poor’s, seeks to outperform the market by buying undervalued issues with the potential to deliver superior returns over the next six months. The NFV 25 is based upon the Fair Value Portfolio. The Fair Value Portfolio chooses the most attractive stocks based on where stocks are trading in relation to their Fair Value, or the price at which a stock ‘should’ trade. That price is based on such fundamental data as corporate earnings, earnings as projected by Wall Street analysts, price-to-book, return on equity, and current yield relative to the S&P 500. The Neural model is based on “Neural Networks” theory, an artificial intelligence concept designed to replicate the human brain’s ability to learn. During a neural model’s training period, prediction errors are reduced by adjusting inputs. In Standard & Poor’s Neural model, we input the factors that produced better market performance during the most recent 6 months. The Fair Value universe is then filtered through the Neural model creating the Neural Fair Value universe of equities. In other words, Fair Value stocks that are more sensitive to current market movements. The NFV25 portfolio is composed of stocks from the Neural Fair Value universe considered to have superior price appreciation potential.”
In addition to NFV, Andre also publishes other market predictions each day on MarketScope using other NeuroShell models.
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II. Legend Advisory’s Shashi Mehrotra
A long-term NeuroShell customer has taken the trading software a step farther than the usual market predictions to extracting economic predictions from sector data. For 2004 the customer correctly made 11 out of 12 economic, market and sector predictions. So far in 2005, his new predictions are accurate as well.
Shashi Mehrotra, the Chief Investment Officer and a Senior Vice President with the Legend Advisory, a small investment advisory firm based in Palm Beach Gardens, Florida, created a synthetic index drawn from different sectors as the basis for the economic forecasts. He modified eight to twelve standard technical indicators for each sector. He used a neural net prediction to predict a four month gain or loss for each sector. He’s been creating the sector models for two and a half years and has used those models to manage money for the Legend Group for one and a half years.
Mehrotra initially presented the results of his predictions at the National Advisors’ Conference in San Antonio in October 2004. At the meeting nine of the predictions were judged correct at the time, but figures from the end of the year validated two additional predictions.
He previously built an asset allocation model using NeuroShell Trader. The Legend Group invests in equities in Europe, large cap, and small cap US stocks, as well as smaller amounts in emerging markets. Since 1999, the Legend Group has been getting asset allocation signals from NeuroShell to manage stock purchases for individuals.
You can read more about Shashi Mehrotra here:
http://www.neuroshell.com/traders.asp?task=interviews&id=7
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III. Fifty percent discount available on multiple copies
Some of our NeuroShell Trader users may not know that you can install this software on as many computers as you wish, as long as it is only used on one computer at a time. You can switch from computer to computer just by first deactivating the software. You must be connected to the Internet. Then go to the Help menu and select About NeuroShell Trader. Then press the Authorization button. That takes you to a dialog that will allow you to deactivate the software.
It is also worth mentioning that you can run multiple copies of NeuroShell on the same computer, whether or not you have dual processors. All you have to do is make more copies of the NeuroShell .exe with different names. Caution: all the copies you make will share data and control files, so there could be some conflicts, but no users have reported anything serious in this area. Most people use this capability to start several long optimizations at the same time, like for overnight, so they don’t have to wait for one to finish before starting another. Of course, if you have only one CPU, they will each take longer. No, sorry, hyperthreading does not help.
For maximum freedom, you can purchase more licenses. If you or your company already own a copy of the NeuroShell Trader, Trader Pro, or DayTrader Pro, and you or your company desire a second or subsequent license of the same software (regular, Pro, or DayTrader Pro), we will, for a limited time, sell them to you at a 50% discount!
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IV. Don’t let your emails to us get lost!
A good deal of your tech support and sales questions come to us by email to support@wardsystems.com and sales@wardsystems.com. Like many of you, we have to use spam filters to keep ourselves from getting buried by mass emailers. Sometimes, though, legitimate email finds its way into the junk folder, and we might not see it if you use really brief or general subjects. The best thing to do is make sure the product name is in the subject line like “NeuroShell 4.7 question serial number 540133121”. If you use a subject like “Hello” or even one like “Question”, then your email could get lost. Help us help you by taking a little more time to write your emails.
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V. One way to stop this newsletter
Just change your email address and don’t tell us.
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