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IMPORTANT: upcoming changes to our estimates

Dear All,

As you may know, our data comes from one company Standard & Poors, but in reality it's two companies: Compustat & CapitalIQ. We rely first & foremost on Compustat: if there's no data in Compustat we do not care what's in CapitalIQ. But there are many little nuances we've been learning to go across from Compustat to grab estimate data. Below please find changes we have done and are planning. For clarification "the past" and "the future" are in relation to a particular point in time (the as-of date)

1. Current estimates and revisions (the future)

Here we need to figure out what the current and next year is for a company, and extract the corresponding estimates (analysts report figures for many years and quarter, but most people just look at these: currY/Q and nextY/Q). To do this we use Compustat as the reference. If the last filing is Q3 of 2015, then the CurrY for estimates is 2015, NextY is 2016, CurrQ is 4-2105, NextQ is 1-2016. This keeps things aligned between Compustat and CapitalIq.

However it's not ideal. Estimates are much more fluid. The "switch" from what is a CurrY and what is CurrQ should mirror the analysts, not the fundamentals. When a company reports, analysts react and adjust their estimates. If compustat takes time to process the filings some of the estimate ratios will be stale. More precisely: the CurrQ and CurrY will point to a past filing (according to the SEC) and NextQ and NextY are pointing the quarter in progress.

We are contemplating changing this and use CapitalIQ to determine what is the current Q and current Y, regardless of what Compustat has. This change should not be a major change if you are targeting large caps since large caps are processed on the same day by Compustat. So , for example, I don't think the #SPEPSCURRY series will be affected much. But it may have a noticeable effect for small caps that can take days on the Compustat side to process.

2. Surprises/actuals/last estimates (the past)

What the company did vs what the analysts thought. We've corrected some long standing issues with surprises. The main problem there had to do with CapIq doing things different than Compustat, ADR ratios, and a new feature they released to go from one side to the other. Overall we don't think this should have a major impact as relatively few companies are affected.

NOTE: Surprises DO NOT have the synchronization problem mention above. They are independent of Compustat.

We'll discuss more internally about making the changes for (1): if having the fundamentals being in synch with the analysts is more important than having more timely estimates. They will never be both, so we need to decide what's best for us.


Portfolio123 Staff.

Nov 19, 2015 10:21:07 AM       
Edit 2 times, last edit by marco at Nov 19, 2015 11:20:39 AM
Re: IMPORTANT: upcoming changes to our estimates


I am most interested in up to date information for my port. That is real money!!!.

Your points about the sims being less important that the OOS are probably correct. Especially, those of us who have been running ports for a while but perhaps Smart Alpha too?

Thank you.

The framework I found, which made the decision incredibly easy, was what I called—which only a nerd would call—a “regret minimization framework.”
--Jeff Bezos on the decision to start

Nov 19, 2015 10:54:00 AM       
Re: IMPORTANT: upcoming changes to our estimates

Thanks for the update Marco, I would certainly prefer to have the most up to date data too, from capital iq in this case. Also, in general it should be better since it is more likely that the data is being used in that way in the portfolios, instead of being used in tandem with fundamental data.

If during this process, you could also add NTM (next twelve months) estimates, available in capital iq that would be great, since I think this is a better measure as NextY can be very close or far away depending on the fiscal year.

Also, if capiq is faster at updating fundamental data in small caps, why isnt this data source being used instead of compustat going forward? it should be beneficial to live portfolios. or is it a licensing issue?

Nov 19, 2015 11:10:34 AM       
Re: IMPORTANT: upcoming changes to our estimates

Yes but lets not get carried away. Estimates are very fluid, update constantly, and plenty of specialized high frequency shops dissect every little bit of real time information. P123 is not for that, and hyper sensitivity can cause knee jerk reactions. A multi-factor approach is fine with daily updates , even if they lag a bit.

Furthermore , there are other inherent, unsolvable problems with hyper sensitivity to news. For example PE, which is Price / Trailing 12 month EPS. The problem is that is uses Price (the most hyper active item out there) for numerator and SEC filings for denominator. It is very possible for PE to be calculated using a price that has reacted to a release, but use stale 12 months for the denominator. The "true" PE will either be too high or too low. Nothing can be done for that.

In other words, P123 is not for designed for real time events trading. And it will never be.

Portfolio123 Staff.

Nov 19, 2015 11:16:47 AM       
Re: IMPORTANT: upcoming changes to our estimates

Isn't Compustat based on IBES and CapitalIQ is their own version after buying some platform. I remember not being able to reconcile the two datasets completely when I had access to both.

I care more about daily fundamental data updates, then European data, then TRADE for Canada.

"The first principle is that you must not fool yourself and you are the easiest person to fool." Richard Feynman
"All models are wrong but some are useful." George Box

Nov 19, 2015 11:22:48 AM       
Re: IMPORTANT: upcoming changes to our estimates

Marco - It isn't so much about designing for real-time events. There is an inherent issue with digital technology (Compustat or any other service). There are delays between when news hits the street and when it is captured, analyzed, processed and sent to P123. Although you said before it was 1 day delay for large companies and 1 week for small companies, it seems to me it is more like 1 week to 1 month.

This delay is problematic because the stock prices have already moved based on information long before we can assimilate the info at P123. During this gap in time stocks that have taken a big hit due to bad news will look great from a fundamental perspective and there is a very good chance we will be buying stocks that look great to us but are really on their way down. Actually more than a very good chance, a very great chance.

One way of approaching this is to use a momentum factor. i.e. if the stock price falls immediately before the P123 buy recommendation comes up then you should reject the recommendation based on the assumption that the valuation is no longer correct. This may explain why momentum "works" to some extent for small caps as the gap between analog news and digitally processed news is larger than for largecaps. However, I don't like this as a solution because fundamentals aside, technically buying on dips in general tends to outperform buying on short term bullishness. This runs counter to attempts to close the gap using momentum.

I see analyst estimates as the alternative. They tend to come out fast and can potentially give P123 a better option for sorting out the information while in no-man's land. This can be readily seen in backtest simulation simply by using a 4 week change in recommendation. So I would stress that getting the info as fast as possible is important and good for P123. Otherwise, deprecate this factor. It is just a landmine as it is. The same applies to the new sales estimates factors.

Also, have you considered comparing what Capital-IQ is delivering (quality and timeliness) versus Zacks estimates? Maybe it all comes from the same source, I'm not sure, but you can get the Zacks estimates at a reasonably low price through Quandl.

Also, don't forget the S&P 500 EPS timing uses the estimates I believe. P123 initially took up the charge on that particular market timing model. There are a lot of R2G models using the S&P 500 EPS estimates based on what P123 provided as an example.

Take care


Nov 19, 2015 11:44:51 AM       
Re: IMPORTANT: upcoming changes to our estimates

Anyone who has tested it has shown the following:

For sims that rebalance every Monday, buying on Tuesday will cost you 20% annualized or more. Test it yourself. But if the signal is missed the first Monday, it is a week until you rebalance again!!!!

Think what happens if you are buying more than a week after the signal because you did not get the signal last week!!!!!

I think this is a big part of why out-of-sample performance is not as good as in-sample. Right now, the delay is more evident for ports than for sims.

This is a real problem, now, for people who rebalance every week.

However, because of the mechanical newsreaders (and other high-frequency traders) this problem will be getting worse in the future for P123 users.

These are Aurelaruel's (and others) results:,6871#33787

Aurelaurel's results copied from above post:

"This method does allow you to see the impact of not getting filled on Monday for a high turnover R2G model.
As Olikea pointed out the decline in perf is correlated with the distance between the trade and the recommendation and the turnover of the strategy.
This is what I get for my "Trading 5 stocks" R2G:
Mon= 122%
Tue= 97%
Wed= 86%
Fri= 65%

It's vital to get filled the day of the recommendation !!" (Still Aurelaurel)

I replace what Aurelaurel says with: It's vital to get filled the next Monday after the signal !!

The framework I found, which made the decision incredibly easy, was what I called—which only a nerd would call—a “regret minimization framework.”
--Jeff Bezos on the decision to start

Nov 19, 2015 11:58:55 AM       
Edit 21 times, last edit by Jrinne at Nov 19, 2015 1:49:05 PM
Re: IMPORTANT: upcoming changes to our estimates

I would prefer analysts estimates as soon as possible in the database, one key factor of my 5 Stock Models Performance is earnings momentum
based on analysts estimates...



Best Regards

Nov 19, 2015 1:50:49 PM       
Re: IMPORTANT: upcoming changes to our estimates

I don’t like having the estimates out of sync with fundamental data, but I also don’t like the idea of withholding the newest analyst estimates, so I suppose I vote for getting the most current analyst estimates. (What about listing “NA” for fundamental data that has been filed but is not yet available in P123? I assume you know this when currQ/Y for CapitalIQ does not match Compustat.)

Thank you for bringing this to our attention.


Nov 19, 2015 3:24:44 PM       
Re: IMPORTANT: upcoming changes to our estimates

I think it's better for p123 deliver the data to user asap. It's designer's responsibility to learn how to use data properly. I think people are saying they don't like p123 make "designer decision" for designers.

Nov 19, 2015 8:25:31 PM       
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