Financial Valuation: Gordon Growth Model

The Gordon Growth model is an offshoot of the standard dividend discount model. This model is used primarily to calculate the intrinsic value of a firm based on the discounted value of future dividends. The Equation At a basic level the Gordon Growth Model is calculated by: P = D1 / r-g P = The intrinsic price you should pay for the firm D1 = The dividend for the next period R = The current discount rate, for our purposes we will use the CAPM for this G = Is the dividend growth rate Applying the Gordon Growth Model So,

CAPM – Capital Asset Pricing Model

CAPM – Capital Asset Pricing Model The CAPM is a staple of most every finance course that focuses on the valuation of equity investments. And though it may be a very good way to begin the process of teaching students how to effectively analyze securities there are a lot of assumptions that make it very difficult to use in a real world setting.…

Equities Lab vs. Gurufocus: Which Backtest Software

This article pits Equities Lab and Gurufocus against each other, to determine which one deserves the individual investor’s loyalty. This is simple, once the criteria for a “good” backtesting tool is specified.  Investopedia.com states that backtesting is “the process of testing a trading strategy on relevant historical data to ensure its viability before the trader risk any actual capital.…

Death Crosses Don’t Work

OK, what is a death cross, and what do I mean by “it doesn’t work”? A death cross is a (very) vivid name for a short term moving average slipping below a longer term moving average.  Technical analysts love to sell when they see death crosses, and buy when they see golden crosses.…

F-Score and Equity Short-Term Reversals

Quantpedia Strategies As I was recently looking around at other quantitative firms, I happened across Quantpedia. In the past we’ve spoken to Quantpedia and are actually featured on their website. However, this time around I was taking a look in their screener section and came across the “F-score and Equity short-term reversals”.…

The Amelia Bedelia Mutual Fund

This how-to shows how to create a strategy in Equities Lab, and how to do some basic analysis of it. For humor value, we take the point of view of a children’s book character, named Amelia Bedelia, who has no common sense. We have all felt this way sometimes. Create A Screener A quantitative mutual fund is a screener.  …
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How To Use Monte Carlo With The Piotroski Score

Henry Crutcher How to analyze a factor without ranking in Equities Lab Create a screen Everything starts with creating a screen.  So, onward! Name your screen Screeners with names can be found later.  If you want to put your screens into categories, simply put MyCoolCategory: at the front. Limit your stocks You can type “Market Cap > 500m” here.  …
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Importing Assignments – University Series

Sometimes it’s better to not reinvent the wheel. A number of our existing professors have allowed a few of their class homework assignments to be publicly available to other professors. You can import these assignments into your Equities Lab class environment and either use them as-is or change them to follow your syllabus.…
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Testing your Equities Lab homework assignments – University Series

Not all assignments are created equal. Courses get more difficult as time goes on, and as you push your students to not only understand the material but also implement what they’ve learned into real-world simulations, some homeworks may become too complex for the standard user to successfully complete. In order to combat this, we allow professors like you to try the homework assignments before they are assigned.…
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Run Backtests in the Background with Recent Backtests

Highlighting Recent Backtests Even with advanced caching methods and multiple speed upgrades, highly complex screeners still take some time to run over the past 20 years. To combat the wait time – and allow you more freedom to analyze strategies and their underlying companies – we built the “Recent Backtest” section.…

How to Long or Short Bitcoin

In a nutshell, Bitcoin is either something as monumental as the introduction of the internet or as futile as the tech bubble of the late 90s. Bitcoin has been in the news for quite some time now, and over time, one begins to wonder if this is a bet you should be in on.…

What is your definition of “high dividend?”

How high are “high” dividend stocks? As the markets continue to lack volatility, a number of investors are attempting to find opportunities outside of the traditional growth stocks. This leads many of them to alternatives such as forex, options, etc. However, some investors are still attempting to find gains in the equity markets, and a number of them are doing so through looking for companies with exceptionally high dividend yields.…

Investment Green Flags – High F-Score

High Piotroski F-Score A recurring name throughout our software and website, the F-score has been continuously tested under many different circumstances and never ceases to amaze me. It may be simplistic, but, when used correctly, can be a very powerful tool for your portfolio.For this Green Flag we want to look at the two calculations we have in the system for the Piotroski F-Score – Yearly and Trailing 12 Months.…

Investment Green Flags – Decreasing Shares Outstanding

Share Buyback Programs A company purchasing back its shares tends to increase the stock price for a couple of reasons. First, it shows that the firm and its employees are confident in the direction the company is heading. Second, it cuts down on the shares available for investors to purchase purchasing the price up through restricting supply.…

Investment Red Flags – Close < 2

Sharing a lot of characteristics with the “Ultra Low Market Cap” red flag, looking for companies with a close of less than 2 gives you a number of companies whose market cap ranges from Micro to Small. These companies tend to have extremely poor fundamentals and also have a high probability of causing negative returns in your portfolio.…

Investment Red Flags – Micro-Cap Companies

Every time I get on the internet to try and find something new to learn about the markets I’m inundated with advertisements selling classes. These classes all seem to follow the same theme – they teach you how to become “rich” on penny and microcap stocks. Some people even get lucky and make some money doing it, but the vast majority is simply throwing money into a pit.…

Investment Green Flags – Increasing Sales and High Asset Turnover

Revenue Growth and High Asset Turnover When it comes to finding green flags, sometimes the simplest idea is the best. In the case of our flag–Revenue Growth and High Asset Turnover–we look for just that. It’s self-explanatory that if a company brings in more money and sells units faster, its long-term price should increase.…

Investment Red Flags – Bad Beneish Score

How negatively does a bad Beneish score affect your portfolio? With all of the recent articles regarding red and green flags, I realized I should begin writing articles on the flags within the score. One such flag, the bad Beneish score, is a key component of the red flags score.…