CA2681767A1 - Using accounting data based indexing to create a portfolio of financial objects - Google Patents

Abstract

A system, method and computer program product creates an index based on accounting based data, as well as a portfolio of financial objects based on the index where the portfolio is weighted according to accounting based data. A passive investment system may be based on indices created from various metrics. The indexes may be built with metrics other than market capitalization weighting, price weighting or equal weighting. Non-financial metrics may also be used to build indexes to create passive investment systems. Additionally, a combination of financial non-market capitalization metrics may be used along with non-financial metrics to create passive investment systems. Once the index is built, it may be used as a basis to purchase securities for a portfolio. Specifically excluded are widely-used capitalization-weighted indexes and price-weighted indexes, in which the price of a security contributes in a substantial way to the calculation of the weight of that security in the index or the portfolio, and equal weighting weighted indexes. Valuation indifferent indexes avoid overexposure to overvalued securities and underexposure to undervalued securities, as compared with conventional capitalization-weighted and price-weighted.

Description

USING ACCOUNTING DATA BASED INDEXING TO CREATE A
PORTFOLIO OF FINANCIAL OBJECTS

Cross-Reference to Related Applications 100011 The present application is a Patent Cooperation Treaty Application of and claims priority to U.S. Patent Application No. 1 1/931,913, filed October 31, 2007, a continuation-in-part of and claims the benefit of U.S. Patent Application No. 60/896,867, filed March 23, 2007, the contents of both of which are incorporated herein by reference in their entirety and are of common assignee.
100021 The present application also claims the benefit of U.S. Patent Application No.
11/509,002, filed August 24, 2006, the contents of which are incorporated herein by reference in their entirety and are of cominon assignee, which claims the benefit of (i) U.S. Patent Application No. 60/751,212, filed Deceniber, 19, 2005, the contents of which are incorporated herein by reference in their entirety and are of common assignee, and (ii) U.S. Patent Application No. 11/196,509, tiled August 4, 2005, the contents of which are incorporated herein by reference in their entirety and are of common assignee, which claims the benefit (a) of U.S.
Patent Application No. 10/159,610, filed June 3, 2002, the contents of which are incorporated herein by reference in their entirety and are of conunon assignee, and (b) U.S. Patent Application No. 10/961,404, filed October 12, 2004, the contents of which are incorporated herein by reference in their entirety and are of common assignee, which in turn claims the benefit of (A) U.S. Patent Application No. 60/541,733, filed February 4, 2004, the contents of which are incorporated herein by reference in their entirety and are of common assignee.

Bockarounrl of the /nvention Field of the Invention 100031 Exemplary embodiments relate generally to securities investing, and more particularly to construction and use of indexes and portfolios based on indexes.
Related Bnckaroturd 100041 Conventionally, there are various broad categories of securities portfolio manageinent. One conventional securities portfolio management category is active management wherein the securities are selected for a portfolio individually based on economic, financial, credit, and/or business analysis; on technical trends; on cyclical patterns;
etc. Another conventional category is passive management, also called indexing, wherein the securities in a portfolio duplicate those that make up an index. The securities in a passively managed portfolio are conventionally weighted by relative market capitalization weighting or equal weighting.
Another middle ground conventional category of securities portfolio management is called enhanced indexing, in which a portfolio's characteristics, performance and holdings are substantially dominated by the characteristics, performance and holdings of the index, albeit with modest active management departures from the index.
100051 The present invention relates generally to the passive and enhanced indexing categories of portfolio manageinent. A securities market index, by intent, reflects an entire market or a segment of a market. A passive portfolio based on an index may also reflect the entire market or segment. Often every security in an index is held in the passive portfolio.
Sometimes statistical modeling is used to create a portfolio that duplicates the profile, risk characteristics, performance characteristics, and securities weightings of an index, without actually owning every security included in the index. (Examples could be portfolios based on the Wilshire 5000 Equity Index or on the Lehman Aggregate Bond Index.) Sometimes statistical modeling is used to create the index itself such that it duplicates the profile, risk characteristics, performance characteristics, and securities weightings of an entire class of securities. (The Lehman Aggregate Bond Index is an example of this practice.) 100061 Indexes are generally all-inclusive of the securities within their defined markets or niarket segments. In most cases indexes may include each security in the proportion that its market capitalization bears to the total market capitalization of all of the included securities. The only common exceptions to market capitalization weighting are equal weighting of the included securities (for example the Value Line index or the Standard & Poors 500 Equal Weighted Stock Index, which includes all of the stocks in the S&P 500 on a list basis; each stock given equal weighting as of a designated day each year) and share price weighting, in which share prices are simply added together and divided by some simple divisor (for example, the Dow Jones Industrial Average). Conventionally, passive portfolios are built based on an index weighted using one of inarket capitalization weighting, equal weighting, and share price weighting.
100071 Most commonly used stock market indices are constructed using a methodology that is based upon either the relative share prices of a sample of companies (such as the Dow Jones Industrial Average) or the relative market capitalization of a sample of companies (such as the S&P 500 (ndex or the FTSE 100 Index). The nature of the construction of both of these types of indices means that if the price or the market capitalization of one company rises relative to its peers it is accorded a larger weighting in the index. Alternatively, a company whose share price or market capitalization declines relative to the other coinpanies in the index is accorded a smaller index weighting. This can create a situation where the index, index funds, or investors who desire their funds to closely track an index, are compelled to have a higher weighting in companies whose share prices or market capitalizations have already risen and a Iower weighting in companies that have seen a decline in their share price or market capitalization.
100081 Advantages of passive investing include: a Iow trading cost of maintaining a portfolio that has turnover only when an index is reconstituted, typically once a year; a low management cost of a portfolio that requires no analysis of individual securities; and/or no chance of the portfolio suffering a loss - relative to the market or market segment the index reflects - because of misjudgments in individual securities selection.
100091 Advantages of using market capitalization weighting as the basis for a passive portfolio include that the index (and therefore a portfolio built on it) remains continually 'in balance' as market prices for the included securities change, and that the portfolio performance participates in (i.e., reflects) that of the securities market or market segment included in the index.
100101 The disadvantages of market capitalization weighting passive indexes, which can be substantial, center on the fact that any under-valued securities are underweighted in the index and related portfolios, while any over-valued securities are over weighted.
Also, the portfolio based on market capitalization weighting follows every market (or segment) bubble up and every market crash down. Finally, in general, portfolio securities selection is not based on a criteria that reflects a better opportunity for appreciation than that of the market or market segment overall.
100111 Most commonly used stock market indices are constructed using a methodology that is based upon either the relative share prices of a sample of companies (such as the Dow Jones Industrial Average) or the relative market capitalization of a sample of companies (such as the S&P 500 Index or the FTSE 100 Index). The nature of the construction of both of these types of indices means that if the price or the market capitalization of one coinpany rises relative to its peers it is accorded a larger weighting in the index. Alternatively, a company whose share price or market capitalization declines relative to the other companies in the index is accorded a smaller index weighting. This can create a situation where the index, index funds, or investors who desire their funds to closely track an index, are compelled to have a higher weighting in companies whose share prices or market capitalizations have already risen and a lower weighting in companies that have seen a decline in their share price or market capitalization.
100121 Price or market capitalization based indices can contribute to a 'herding' behavior on the behalf of investors by effectively compelling any of the funds that atteinpt to follow these indices to have a larger weighting in shares as their price goes up and a lower weighting in shares that have declined in price. This creates unnecessary volatility, which is not in the interests of most investors. It may also lead to investment returns that have had to absorb the phenomenon of having to repeatedly increase weightings in shares after they have risen and reduce weightings in them after they have fallen.
100131 Capitalization-weighted indexes ("cap-weighted indexes") dominate the investinent industry today, with approximately $2 trillion currently invested.
Unfortunately, cap-weighted indexes suffer from an inherent flaw as they overweight all overvalued stocks and underweight all undervalued stocks. This causes cap-weighted indexes to under-perform relative to indexes that are immune to this shortcoming. In addition, cap-weighted indexes are vulnerable to speculative bubbles and emotional bear markets which inay unnaturally drive up or down stock prices respectively.
100141 Equal-weighted indexation is a popular alternative to cap-weighting but one that suffers from its own shortcomings. One significant problem with equal-weighted indexes is that they come out of the same cap-weighted universes as cap-weighted indexes. For example, the S&P Equal Weighted Index simply re-weights the 500 equities that comprise the S&P 500, retaining the bias already inherent to cap-weighted indexes.
100151 High turnover and associated high costs are additional problems of equal-weighted indexes. Equal-weighted indexes include small illiquid stocks, which are required to be held in equal proportion to the larger, more liquid stocks in the index. These small illiquid stocks must be traded as often as the larger stocks but at a higher cost because they are less liquid.
100161 What is needed then is an improved method of weighting financial objects in a portfolio based on an index that overcomes shortcomings of conventional solutions.

Summary 100171 In an exemplary embodiment a system, method and computer program product for index construction and/or portfolio weighting of financial objects for the purpose of investing in the index is disclosed.
100181 Exemplary embodiments may use accounting data based indexing, i.e., accounting data based measures of firm size, rather than market capitalization, to construct an index of financial objects Construction of an index, according to an exemplary embodiment, may include selecting financial objects to be included in an_index, and weighting the financial objects in the index. By avoiding the inherent valuation bias of cap-weighted indexes, accounting data based indexes (ADBI) may outperform cap-weighted indexes by as much as 200 bps in the US and by more than 250 bps internationally, based on extensive back testing (to 1962 in the US and to 1988 internationally).
100191 An exemplary embodiment may use four specific metrics in ADBI
construction:
book equity value; income (free cash flow); sales; and/or gross dividends, if any. Another exemplary embodiment may include additional and/or alternative metrics.
Metrics may be varied by country according to another exeinplary embodiment. An ADBI construction strategy may offer several advantages. For example, ADBI may outperform cap-weighted indexes.
Additionally, ADBI may be adaptable to distinct strategies. ADBI may be used to construct either large or small coinpany indexes, industry sector indexes, geographic indexes and others.
ADBI may also effectively limit portfolio risk by providing the benefits of traditional cap-weighted indexes, including diversification, broad niarket participation, liquidity and low turnover, while generating incrementally higher returns with somewhat lower volatility than comparable cap-weighted indexes. ADBI may also provide protection against market bubbles and fads because a stock's weight in the index is immune to errors in stock valuation.
100201 An exemplary embodiment may be a method of constructing a portfolio of financial objects, including the steps of: purchasing a portfolio of a plurality of mimicking or resampling of financial objects to obtain and/or create a mimicking portfolio, where performance of the portfolio of mimicking or resampled financial objects substantially mirrors the performance of an accounting data based index based portfolio without substantially replicating the accounting data based index based portfolio.

100211 The embodiment niay further include: obtaining and/or using a risk model for the portfolio of mimicking or resampled financial objects, where the risk model mirrors a risk model of the accounting data based index.
100221 The performance of the portfolio of mimicking or resampled financial objects may substantially mirror the performance of the accounting data based index based portfolio without substantially replicating financial objects and/or weightings in the accounting data based index based portfolio. The risk model may be substantially similar to the Fama-French factors, where the Fama-French factoi-s may include at least one of size effect, value effect, and/or momentum effect.
100231 A financial object, according to one exemplary embodiinent, may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a resampled portfolio, a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a financial position, a currency position, a trust, a real estate investment trust (REIT), a portfolio of trusts and/or REITS, a security instrument, an equitizing instrument, a commodity, an exchange traded note, a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to: a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments. In an exemplary embodiment, the financial object may include a debt instrument, including, according to one exemplary embodiment, any one or more of a bond, a debenture, a subordinated debenture, a mortgage bond, a collateral trust bond, a convertible bond, an income bond, a guaranteed bond, a serial bond, a deep discount bond, a zero coupon bond, a variable rate bond, a deferred interest bond, a commercial paper, a government security, a certificate of deposit, a Eurobond, a corporate bond, a government bond, a municipal bond, a treasury-bill, a treasury bond, a foreign bond, an emerging market bond, a developed market bond, a high yield bond, ajunk bond, a collateralized instrument, an exchange traded note (ETN), and/or other agreements between a borrower and a lender.
100241 Another exemplary embodiment, may be a method of constructing a portfolio of financial objects, including the steps of: purchasing a plurality of financial objects according to weightings substantially similar to the weightings of an accounting data based index, where performance of the plurality of financial objects substantially mirrors the performance of the accounting data based index without using substantially the same financial objects in the accounting data based index.
100251 The financial object may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the conti-act, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to: a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments.
100261 Another exemplary embodiment, the may be a method of constructing a portfolio of financial objects, including the steps of: determining overlapping financial objects appearing in both an accounting data based index (ADBI) and a conventional weighted index, where the conventionally weighted index may include an index weighted based on at least one of capitalization, equal weighting, and/or share price weighting, and where the ADBI may include weighting based on at least one accounting data based factor and not based on any of capitalization, equal weighting, and/or share price weighting index; comparing weightings of the overlapping financial objects in the ADBI with weightings of the overlapping financial objects in the conventionally weighted index; and/or purchasing at least one financial object based on the comparing.
100271 The purchasing may include at least one of: purchasing a long position in at least one overlapping financial object when the comparing indicates the at least one overlapping financial object is over weighted in the non-capitalization weighted index relative to the conventional index; and/or purchasing a short position in at least one overlapping financial object when the coinparing indicates the at least one overlapping financial object is underweighted in the non-capitalization weighted index relative to the conventional index.
100281 The purchasing of the long and/or short positions may be implemented by using total return swaps. The long and/or short positions may be held for one year.

100291 The embodiment may further include rebalancing the portfolio. The rebalancing may include: at least one of creating new long and/or short positions using cash flow froin new capital contributions; and/or altering existing long and/or short positions using cash flow from new capital contributions.
100301 The embodiment may further include using leverage to obtain the long and/or short positions.
100311 The coinparing may include calculating a difference between the weightings, and/or calculating a diffei-ence between arithmetically modified values of the weightings. The arithinetically modified values of the weightings may include square roots of the weightings.
100321 The comparing may include calculating a difference based on tiers of weightings using stratified sampling.
100331 The financial object may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to: a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments or accounts.
100341 In another exemplary embodiment, the present invention may be a inethod of constructing a portfolio of financial objects, including the steps of:
determining non-overlapping financial objects appearing in only one of either an accounting data based index (ADBI) or a conventional weighted index by comparing financial objects in an ADBI with financial objects in a conventionally weighted index, where the conventionally weighted index may include conventionally weighting based on at least one of capitalization, equal weighting, and/or share price weighting, and where the ADBI may include accounting data based weighting on at least one accounting data based factor and not based on any of capitalization, equal weighting, and/or share price weighting index; weighting the non-overlapping financial objects appearing only in the ADBI by accounting data based weighting; weighting the non-overlapping financial objects appearing only in the conventionally weighted index by the conventional weighting; and/or purchasing financial objects based on the weightings.
100351 The accounting data based, weighting may include: (a) gathering data about a plurality of financial objects; (b) selecting a plurality of financial objects to create an index of financial objects; and/or (c) weighting each of the plurality of financial objects selected in the index based on an objective measure of scale and/or size based on accounting data of a company associated with each of the plurality of financial objects, where the weighting may include: (i) weighting at least one of the plurality of financial objects based on accounting data; and/or (ii) weighting other than weighting based on at least one of market capitalization, equal weighting, and/or share price weighting.
100361 The embodiment may further include weighting each of the plurality of financial objects, where each of the financial.objects may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to: a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments.
100371 An exemplary embodiment may further include weighting each of the plurality of financial objects, where the each of the financial objects may include a stock.
100381 Exemplary objective measures of scale and/or size may include weighting based on any dividends, book value, cash flow, and/or revenue. An exemplary einbodiment may include additional metrics. The embodiment may further include equally weighting each objective measure of scale and/or size.
100391 The einbodiment may further include weighting based on the objective measure of scale and/or size, where the objective measure of scale and/or size inay include a measure of company size and/or country or industry sector size associated with each of the plurality of financial objects.

100401 The measure of company size may include at least one of: inventory, revenue, sales, income, book income, taxable income, earnings growth rate, earnings before interest and tax (EBIT), earnings before interest, taxes, depreciation and amortization (EBITDA), retainer earnings, number of employees, capital expenditures, salaries, book value, assets, fixed assets, current assets, quality of assets, operating assets, intangible assets, dividends, gross dividends, dividend yields, cash flow, liabilities, losses, long terin liabilities, short term liabilities, liquidity, long term debt, short term debt, bonds, corporate bonds, net worth, shareholder equity, goodwill, research and development expenditures, costs, cost of goods sold (COGS), liquidity and/or research and development costs.
100411 The measure of country size may include measures relating to the economy, demographics, geographic scale, population, area, gross domestic product and its growth, oil consumption, inflation, unemployment, reserves of natural and/or man-made resources and/or products, relative corruption (as perhaps measured by indices), expenditures, democracy and/or political factors, social and/or religious factors, expenditures, gross national income (GNI), gross national product (GNP), and/or gross national debt (GND). Derivatives of the foregoing may also be included, such as, for example, changes, averages and ratio between any of the foregoing measures, as well as per capita numbers thereof.
100421 The financial object may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to: a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments.
100431 Another exemplary embodiment may be a inethod, executed on a data processing system, including the steps of: creating an accounting data based index (ADBI) based on accounting data including: selecting a universe of financial objects, and selecting a subset of the universe based on the accounting data to obtain the ADBI; and/or creating a portfolio of financial objects using the ADBI, including weighting the financial objects in the portfolio according to a measure of value of a company associated with each financial object in the portfolio.
100441 The universe according to an exemplary embodiment may include at least one of: a sector; a market; a market sector; an industry sector; a geographic sector; an international sector;
a sub-industry sector; a government issue; and/or a tax exempt financial object.
100451 The acceunting based data used in weighting as a measure of value of the company associated with the financial object, may include at least one of: any dividends; revenue; cash flow; and/or book value. An exemplary embodiment may include selecting and/or weighting constituents based on industry sector based metrics.
100461 The accounting based data may be weighted relatively dependent on the geography and/or other country metric of the company associated with the financial object 100471 The financial object may include: a debt instrument; at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether sucli contract, for purposes of accounting, is considered an asset or liability; a fund;
and/or an investment entity or account of any kind, including an interest in, or rights relating to: a hedge fund, an exchangq traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments.
100481 Another exemplary embodiment may be a computer-implemented method for construction and management of an index and at least one index fund containing a portfolio of financial objects based on the index, where weighting of the index is based on accounting based data rather than on stock prices or market capitalization or equal weighting, the computer-implemented method including the steps of: creating an index, and at least one index fund containing a portfolio of financial objects, where the constituent weightings of the companies issuing the financial objects in the index fund are based upon accounting based data regarding the companies associated with the financial objects, where the accounting based data may includes any dividends, cash flow, revenues, and/or book value.
100491 The embodiment may further include: creating the index, and the at least one index fund containing a portfolio of financial objects where the constituent weightings are based upon any ratio of accounting based data, or any manipulation of accounting based data, that is contained within a standard company annual report and accounts.
100501 The embodiment may further include: creating the index, and the at least one index fund containing a portfolio of financial objects where the constituent weightings are based upon any ratio of accounting based data per share, or any manipulation of accounting based data, that is contained within a standard company annual report and accounts.
100511 The embodiment may further include: inanaging an accounting based data index, and at least one index fund containing a portfolio of financial objects based on the index including:
altering the relative weightings of the financial objects within the at least one index fund as the accounting based data concerning the companies associated with the financial objects changes.
100521 The altering may include at least one of: altering based on at least one of: changes in relative weightings of financial objects in the index; and/or changes in the financial objects that are members of the index outside the sample changes; and/or altering at the time of at least one of when, and/or after at least one company associated with a financial object of the index reports its accounting information.
100531 The financial object may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instruinent and/or a security, where the financial instrLnnent and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund; and/or an investment entity of any kind, including an interest in, or rights relating to: a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, an investment vehicle, and/or any other pooled and/or separately managed investments.
100541 The measure of company size may include at least one of: a financial ratio of a company; a ratio of accounting based data; a ratio of accounting based data per share; a ratio of a first accounting based data to a second accounting based data; a liquidity ratio; a working capital ratio; a current ratio; a quick ratio; a cash ratio; an asset turnover ratio;
a receivables turnover ratio; an average collection period ratio; an average collection period ratio;
an inventory turnover ratio; an inventory period ratio; a leverage ratio; a debt ratio; a debt-to-equity ratio; an interest coverage ratio; a profitability ratio; a return on common equity (ROCE) ratio; profit margin ratio; an earnings per share (EPS) ratio; a gross profit margin ratio;
a return on assets ratio; a return on equity ratio; a dividend policy ratio; a dividend yield ratio; a payout ratio; a capital market analysis ratio; a price to earnings (PE) ratio; and/or a market to book ratio.
100551 In accordance with present embodiments, a method, executed on a data processing system, includes: creating an accounting data based index (ADBI) based on accounting data including: selecting a universe of financial objects, selecting a subset of the financial objects of the universe based on at least one of the accounting data, and weighting the subset of the universe according to at least one of the accounting data to obtain the ADBI;
and creating a portfolio of financial objects using the ADBI, including the subset of selected and weighted financial objects.
100561 In an embodiment, the universe may include at least one of: a sector; a market; a market sector; an industry sector; a geographic sector; an international sector; a sub-industry sector; a government issue; and/or a tax exempt financial object; agriculture, forestry, fishing and/or hunting industry sector; mining industry sector; utilities industry sector; construction industry sector; manufacturing industry sector; wholesale trade industry sector; retail trade industry sector; transportation and/or warehousing industry sector;
information industry sector;
finance and/or insurance industry sector; real estate and/or rental and/or leasing industry sector;
professional, scientific, and/or technical services industry sector;
management of companies and/or enterprises industry sector; administrative and/or support and/or waste nianageinent and/or remediation services industry sector; education services industry sector; health care and/or social assistance industry sector; arts, entertainment, and/or recreation industry sector;
accominodation and/or food services industry sector; other services (except public administration) industry sector; and/or public administration industry sector.
100571 In an embodiment, the accounting based data used in weighting as a measure of value of the company associated with the financial object, may include at least one of: dividends, if any; revenue; cash flow; book value; collateral; assets; distributions; funds from operations;
adjusted funds from operations; earnings; income; liquidity; country metrics including at least one of: economic metrics, area, population, unemployment rate, reserves, resource consumption, democracy index, corruption index, government debt, private debt, government expenditures, nominal interest rate, commercial paper yield, consumer price index (CPI), purchasing power, relation of purchasing power to nominal exchange rate and any deviations from historical trend, and/or country current account flow; the economic metrics including at least one of: a gross donlestic product (GDP), a gross national product (GNP), a gross net income (GNI), and/or a gross national debt (GND); industry metrics including at least one of:
industry growth rate, total capital expenditures, inventories total - end of year, average industry dividends, supplemental labor costs, inventories finished products - end of year, new orders for manufactured goods, fuel costs, inventories work in process - end of year, shipinents, electric energy used, inventories, materials, supplies, fuels, etc. - end of year, unfilled orders, inventories by stage of fabrication, value of manufacturers inventories by stage of fabrication - beginning of year, Inventories Number of production workers, inventories total - beginning of year, inventories-to-shipments ratio, payroll of production workers, inventories finished products -beginning of year, value of product shipments, hours of production workers, inventories work in process -beginning of year, statistics from department of commerce, industry associations, for industry groups and industries, cost of purchased fuels and electric energy, inventories, materials, supplies, fuels, -beginning of year, geographic area statistics, electric energy quantity purchased, value of shipments - total, annual survey of manufacturers (ASM), electric energy cost, value of shipments - products, employment, electric energy generated, value of shipments - total miscellaneous receipts, all employees payroll, electric energy sold and/or transferred, total miscellaneous receipts - value of resales, all employees hours , cost of purchased fuels, total miscellaneous receipts - contract receipts, all employees total, compensation, capital expenditure for plant and/or equip-nent total, other total miscellaneous receipts, all employees total fringe benefit costs, capital expenditure for plant and/or equipment -buildings and/or other structures, interplant transfers, total cost of materials, capital expenditure for plant and equipment - machinery and/or equipment total, costs of materials - total, payroll, capital expenditure for plant and equipment - autos, trucks, etc for highway use, costs of materials -materials, parts, containers, packaging, value added by manufacture, capital expenditure for plant and equipment - computers, peripheral data processing equipment, costs of materials -resales, cost of materials consumed, capital expenditure for plant and equipment - all other expenditures, costs of materials - purchased fuels, value of shipments, value of manufacturers inventories by stage of fabrication - end of year, costs of materials -purchased electricity, costs of materials - contract work, industry cost of capital, and/or average industry dividend;
employees; margin; profit margin; term structure; interest rate; seasonal factor; a financial ratio of a company; a ratio of accounting based data; a ratio of accounting based data per share; a ratio of a first accounting based data to a second accounting based data; a liquidity ratio; a working capital ratio; a current ratio; a quick ratio; a cash ratio; an asset turnover ratio; a receivables turnover ratio; an average collection period ratio; an average collection period ratio; an inventory turnover ratio; an inventory period ratio; a leverage ratio; a debt ratio; a debt-to-equity ratio; an interest coverage ratio; a profitability ratio; a return on common equity (ROCE) ratio; profit margin ratio; an earnings per share (EPS) ratio; a gross profit margin ratio; a return on assets ratio; a return on equity ratio; a dividend policy ratio; a dividend yield ratio; a payout ratio; a capital market analysis ratio; a price to eamings (PE) ratio; and/or a market to book ratio.
100581 In an embodiment, the accounting based data may be weighted relatively dependent on the geography of the company associated with the financial object.
100591 In an embodiment, the financial object may include: at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; financial instrument and/or a security, wherein the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a commodity;
a financial position;
a currency position; a trust, a real estate investment trust (REIT), real estate operating company (REOC), and/or a portfolio of trusts; a debt insti-ument including at least one of: a bond, a debenture, a subordinated debenture, a mortgage bond, a collateral trust bond, a convertible bond, an income bond, a guaranteed bond, a serial bond, a deep discount bond, a zero coupon bond, a variable rate bond, a deferred interest bond, a commercial paper, a government security, a certificate of deposit, a Eurobond, a corporate bond, a government bond, a municipal bond, a treasury-bill, a treasury bond, a foreign bond, an emerging market bond, a high yield bond, a developed market bond, a junk bond, a collateralized instrument, an exchange traded note (ETN), and/or other agreements between a borrower and a lender; a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to: hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments.
100601 In an embodiment, a computer-implemented method for constructing at least one of a high-yield debt instruments index and/or a portfolio of high-yield debt instruinents based on the high yield debt instruments index is provided, the method including: selecting constituent high-yield debt instruinents of the high-yield debt instruments index based upon at least one metric regarding the companies associated with the high-yield debt instruments, wherein the at least one metric includes at least one of sales, book value, cash flow, dividends if any, collateral, a composite of the other metrics, and/or ratios pertaining thereto; and weighting the constituent high-yield debt instruments based upon at least one inetric regarding the size of the companies associated with the high-yield debt instruments to obtain constituent weightings for each respective constituent high-yield debt instrument, wherein the at least one metric includes at least one of sales, book value, cash flow, dividends if any, collateral, a composite of the other nietrics, and/or ratios pertaining thereto.
100611 In an embodiment, the weighting is substantially exclusive of an influence of price of the companies. In another embodiment, the weighting is not based on any of equal weighting, weighting in proportion to price, weighting in proportion to market capitalization, and/or weighting in proportion to free float. In another embodiment, the at least one metric includes data found within a generally accepted accounting principles (GAAP) conipany annual report and accounts (GAAP reports). In an embodiinent, the method further includes basing the constituent weightings of the high-yield debt instruments upon at least one of a ratio or a manipulation of the accounting data. In another embodiment, the constituent weightings are based upon at least one of a ratio or a manipulation of the accounting data including basing the constituent weightings on at least one of: a relative size of the return on assets of the selected companies, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof, wherein the return is determined based on cash flow.
In another embodiment, the constituent weightings of the high-yield debt instruments within the high-yield debt instruments index or high yield debt instruments fund are altered as the accounting data concerning the companies in or outside the index changes. In another embodiment, the constituent weightings of the high-yield debt instruments within the fund are altered when at least one of: one or more of the coinpanies report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of the companies in the index have reported their quarterly and/or annual accounting data. In an embodiment, the weighting includes calculating the constituent weightings based upon the at least one accounting data. In another embodiment, the calculating is performed by an index manager calculator.
100621 In an embodiment, a computer-implemented method for constructing at least one of an emerging markets financial objects index and/or an emerging markets financial objects portfolio of emerging market financial objects based on the emerging markets financial objects index is provided, the method including: selecting constituent emerging inarket financial objects of the emerging markets financial objects index based upon at least one accounting data regarding a company relating to the emerging market financial object and/or demographic data regarding the region, country, and/or sovereign associated with the emerging market financial object; and weighting the constituent emerging market financial objects based upon at least one accounting and/or demographic data regarding the region, country and/or sovereign associated with the emerging market financial objects to obtain constituent weightings for each respective constituent emerging market financial object, wherein the emerging market financial object includes at least one of an emerging market debt instrument and/or an emerging market equity instrument, and wherein the at least one accounting data and/or demographic data includes at least one of a demographic measure, a population level, an area, a geographic area, an economic factor, a gross domestic product (GDP), GDP growth, a natural resource characteristic, an energy metric, a petroleum characteristic, a resource consumption metric, a petroleum consumption amount, a liquid natural gas (LNG) characteristic, a liquefied petroleum gas (LPG) characteristic, an expenditures characteristic, gross national income (GNI), a debt characteristic, a rate of inflation, a rate of unemployinent, a reserves level, a population characteristic, a corruption characteristic, a democracy characteristic, a social metric, a political inetric, a per capita ratio of any of the foregoing or any other characteristic, a derivative of any foregoing or any other characteristic and/or a ratio of two of the foregoing or any other characteristics.
100631 In an einbodiment, the weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float. The demographic data may include data found within a database of information pertaining to at least one of regions, sovereigns and/or countries. In an embodiment, the method may further include basing the constituent weightings of the einerging market financial objects upon at least one of a ratio or a manipulation of the accounting and/or demographic data. In an embodiment, the constituent weightings of the einerging market financial objects within the emerging markets financial objects index and/or emerging markets financial objects portfolio are altered as the accounting data and/or demographic data concerning the regions, countries and/or sovereigns in or outside the index changes. In an embodiment, the weighting includes calculating the constituent weightings based upon the at least one accounting data and/or deniographic data. In another embodiment, the calculating is performed by an index inanager calculator.
100641 In an embodiment, a computer-implemented method for constructing at least one of a Real Estate Investment Trust (REIT) and/or Real Estate Operating Company (REOC) index or a REIT and/or REOC fund including a portfolio of REITs and/or REOCs based on the REIT
and/or REOC index is provided, the method including: selecting constituent REITs and/or REOCs for the REIT and/or REOC index based upon at least one data metric of REIT and/or REOC size, wherein the data metric includes at least one of revenues, adjusted funds from operations (AFFO), funds from operations (FFO), distributions, dividends, and/or assets; and weighting the constituent REITs based upon at least one data inetric of REIT
and/or REOC size, wherein the data metric includes at least one of revenues, adjusted funds from operations (AFFO), funds from operations (FFO), distributions, dividends, and/or assets, to obtain constituent weightings for each respective constituent REIT and/or REOC.
100651 In an embodiment, the weighting is substantially exclusive of an influence of REIT
and/or REOC price. In another einbodiment, the weighting is not based on any of equal weighting, weighting in proportion to REIT and/or REOC price, weighting in proportion to market capitalization, and/or weighting in proportion to free float. In another einbodiment, at least one accounting data includes at least one of total assets, funds from operations (FFO), adjusted funds from operations (AFFO), revenues, total dividend distributions, and/or ratios pertaining thereto. In another embodiment, the accounting data includes data found within a.
generally accepted accounting principles (GAAP) company annual report and accounts (GAAP
reports). In another embodiment, the method further includes basing the constituent weightings of the REITs upon at least one of a ratio or a manipulation of the accounting data.
100661 In an embodiment, the basing of the constituent weightings upon at least one of a ratio or a manipulation of the accounting data includes basing the constituent weightings on at least one of: a relative size of the return on assets of the selected companies, the return on investment thereof, and/or the return on capital thereof co-npared to the cost of capital thereof, wherein the return is determined based on at least one of funds from operations (FFO) or adjusted funds from operations (AFFO). In another embodiment, the constituent weightings of the REITs within the REIT index or REIT fund are altered as the accounting data concerning the companies in or outside the index changes. In another embodiment, the constituent weightings of the REITs within the fund are altered when at least one of: one or more of the companies report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of the coinpanies in the index have reported their quarterly and/or annual accounting data.
100671 In another embodiment, the weighting includes calculating the constituent weightings based upon the at least one accounting data. In another embodiment, the step of calculating is performed by an index manager computer system. In another embodiment, 100681 In an embodiment, a computer-implemented inethod for constructing at least one of a currency instrument index and/or a currency instrument portfolio of currency and/or related foreign exchange (FX) instruments based on the currency instrument index is provided, the inethod including: selecting constituent currencies and/or FX instruments of the currency index based upon at least one accounting and/or demographic data regarding at least one of the regions, countries, and/or sovereigns associated with the currencies and/or FX
instruments; and weighting the constituent currencies and/or FX instruments based upon at least one accounting and/or demographic data regarding at least one of the regions, countries and/or sovereigns associated with the currencies and/or FX instruments to obtain constituent weightings for each respective constituent currency and/or FX instrument.
100691 In an embodiment, the weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.
100701 In another.embodiment, the at least one accounting or demographic data includes at least one of a demographic measure; a population level; an area; a geographic area; an economic factor; a gross domestic product (GDP); GDP growth; a natural resource characteristic; a petroleLun characteristic; a resource consumption inetric; a petroleum consumption amount; a liquid natural gas (LNG) characteristic; a liquefied petroleum gas (LPG) characteristic; an expenditures characteristic; gross national income (GNI); a debt characteristic; a rate of inflation; a rate of unemployment; a reserves level; a population characteristic; a corruption characteristic; a democracy characteristic; a social metric; a political metric; nominal interest rates and the ratios of noininal interest rates between issuing sovereign entities; commercial paper yield metric; credit rating metric; consuiner price index (CPI);
purchasing power of local currency metric; metrics measuring relations between the purchasing power of local currency metric and nominal exchange rates and deviations frorn historical trends in such metrics;
government exchange rate regime; a per capita ratio of any of the foregoing or any other characteristic; a derivative of any foregoing or any other characteristic and/or a ratio of two of the foregoing or any other characteristics.
100711 In an embodiment, the demographic data includes data found within a database of inforination pertaining to regions, sovereigns and/or countries. In another embodiment, the method further includes basing the constituent weightings of the currency and related FX
instruments upon at least one of a ratio or a manipulation of the accounting data. In another embodiment, the constituent weightings of the currency and related FX
instruments within the currency index or currency fund are altered as the demographic data concerning the regions, countries, or sovereigns associated with currency or related debt instruments in or outside the index changes.
100721 In another embodiment, the constituent weightings of the currency and related FX
instruments within the FX fund are altered when at least one of: one or more of the regions, countries or sovereigns report their quarterly and/or annual accounting or demographic inforination; and/or at a pre-determined time after which the majority of the regions, countries, or sovereigns in the index have reported their quarterly and/or annual accounting or demographic data. In another embodiment, the weighting includes calculating the constituent weightings based upon the at least one accounting data. ln another embodiment, the calculating is performed by an index manager calculator.
100731 In an einbodinient, a computer-implemented method for constructing at least one of a commodities index and/or a commodities portfolio of com-nodities and/or derivative instruments based on the commodities index is provided, the inethod including: selecting constituent commodities and/or derivative instruments of the commodities index based upon at least one accounting data regarding the companies or industries associated with the commodities; and weighting the constituent commodities and/or derivative instruments based upon at least one accounting data regarding the companies and/or industries associated with production and consumption of the commodities to obtain constituent weightings for each respective commodity and/or derivative instrument. In an embodiment, the weighting is substantially exclusive of an influence of share price of the companies or industries. In another embodiment, the weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float. In another embodiment, the at least one accounting data includes at least one of sales, book value, cash-flow, any dividends, total assets, revenue, number of employees, profit margins, and/or collateral, and/or ratios pertaining thereto of the companies or industries responsible for the production and consumption of a commodity, total per unit cost of production of the commodity, the commodity reserves value, term structure of the commodity's futures, inomentum in price of the commodity, and any seasonal factors that affect the valuation of the commodity.
100741 In another embodiment, the accounting data includes data found within a generally accepted accounting principles (GAAP) company annual report and accounts (GAAP
reports).
In another embodiment, the method further includes basing the constituent weightings of the coinmodities and related derivative instruments upon at least one of a ratio or a manipulation of the accounting data. In another embodiment, the basing of the constituent weightings upon at least one of a ratio or a manipulation of the accounting data inciudes basing the constituent weightings on at least one of: a relative size of the return on assets of the companies or industries responsible for producing and consuming selected commodities, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof, wherein the return is determined based on cash flow.
100751 In another embodiment, the constituent weightings of the commodities and related derivative instruments within the commodities index or commodities fund are altered as the accounting data concerning the companies or industries responsible for producing and consuming the commodities in or outside the index changes. In another embodiinent, the constituent weightings of the commodities and related derivative instruments within the fund are altered when at least one of: one or more of the companies or industries report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of the companies or industries responsible for producing and consuming the commodities in the index have reported their quarterly and/or annual accounting data.
100761 In another embodiment, the weighting includes calculating the constituent weightings based upon the at least one accounting data. In another embodiment, the calculating is performed by an index manager calculator.
100771 In an embodiinent, a computer-implemented method for the construction and inanagement of a financial object index and/or a financial object market index fund containing a portfolio of financial objects based on the financial object market index is provided, the method including: creating a financial object market index, and/or at least one financial object market index fund including a portfolio of financial objects, wherein the creating includes: selecting constituent financial object of the financial object inarket index based upon at least one accounting data about the entities associated with the financial object, wherein the selecting is exclusive of a material influence of price, and weighting the constituent financial object of the financial object inarket index to obtain constituent weightings based upon at least one accounting data regarding the entities associated with the financial objects, wherein the weighting is exclusive of a inaterial influence of price of the financial object associated with the entity, and wherein the weighting is not based on any of equal weighting, weighting in proportion to share price of the stocks of the companies, weighting in proportion to market capitalization of the entities associated with the financial object, and/or weighting in proportion to free float.
100781 In another embodiment, the method further includes basing the constituent weightings of the financial object upon at least one of: a ratio and/or a manipulation of the accounting data. In another embodiment, the constituent weightings of the financial object within the financial object market index fund are altered as the accounting data concerning the companies in or outside the index changes.
100791 In another embodiment, the constituent weightings of the financial object within the financial object fund are altered when at least one of: one or more of the companies report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of the companies in the index have reported their quarterly and/or annual accounting data. In another embodiment, the accounting data may include data found within a generally accepted accounting principles (GAAP) company annual report and accounts (GAAP
reports).
In another embodiment, the accounting data may include at least one of:
relative size of profit of a company, and/or pre-exceptional profits, sales, assets, cash flow, shareholders' equity, and/or a return on investment of the entity.
100801 In another exemplary einbodi-nent, the accounting data may include: a weighted combination of sales, cash flow, and any other generally accepted accounting data. In another embodiment, the data includes at least one of any dividends, profit, assets and/or ratios pertaining thereto. In another embodiment, the another accounting data includes at least one of any dividends, profit, assets, and any fundamental accounting item, and/or ratio pertaining thereto. In another embodiment, the basing of the constituent weightings upon at least one of a ratio and/or a manipulation of the accounting data includes basing the constituent weightings on at least one of: a relative size of the return on assets of the selected companies, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof.

100811 In another exeinplary embodiment, the creating including calculating the constituent weightings based upon the at least one accounting data. In another einbodiment, the calculating is performed by an index manager calculator.
100821 In an exemplary embodiment, a coinputer-implemented system for construction and management of a financial index and a portfolio based on the financial index is provided, where the financial index is generated based on accounting data, the system including: an index manager configured to create the financial index, and at least one portfolio based on the financial index, wherein constituent weightings of constituents of the poi-tfolio are based upon at least one accounting data regarding a company associated with each of the constituents of the financial portfolio, the selection of the constituents of the financial index based upon at least one accounting data about the companies exclusive of a material influence of share price, and wherein the constituent weightings are exclusive of a material influence of share price of the companies and wherein the constituent weightings are not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float. In an embodiment, the accounting based data includes at least one of: dividends and/or ratios related thereto.
100831 In another embodiment, a co-nputer readable medium is provided embodying prograin logic which when executed by a computer performs a method including:
creating a financial index, and at least one portfolio based on the financial index, wherein constituent weightings of constituents of the portfolio are based upon at least one accounting data regarding a company associated with each of the constituents of the portfolio, the creating including:
selecting constituents of the financial index based upon at least one accounting data about the companies exclusive of a material influence of share price, and weighting the constituents based on at least one accounting data exclusive of a material influence of share price of the companies to obtain constituent weightings, wherein the constituent weightings are not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.
100841 In an embodiment, the method further includes: creating the financial index, and the at least one portfolio, wherein the at least one accounting data includes at least one of: dividends and/or ratios pertaining thereto. In another embodiment, the another accounting data includes at least one of: any dividends and/or ratios pertaining thereto. In another embodiment, the accounting data includes at least one of: any dividends and/or ratios pertaining thereto. In another embodiment, the accounting data includes at least one of: any dividends and/or ratios pertaining thereto.
100851 In another embodiment, the financial object market index is based on accounting data, the method including: creating a financial object market index including: selecting constituent financial objects of the financial object market index based upon at least one accounting data regarding the companies associated with the financial objects, wherein the selecting is substantially exclusive of an influence of price, and weighting the constituent financial object based upon at least one accounting data regarding the entities associated with the financial object to obtain constituent weightings, wherein the weighting is substantially exclusive of an influence of price of the financial object associated with the entity, and wherein the weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.
100861 In another embodiment, a financial object market index fund containing a portfolio of stocks based on a stock market index is provided, the niethod including:
creating a stock market index fund including a portfolio of financial objects based on the financial objects market index wherein the financial objects market index is created by selecting constituent stocks of the financial objects market index based upon at least one accounting data about the companies exclusive of a material influence of price, and by weighting the constituent financial objects of the financial objects market index based upon at least one accounting data regarding the companies whose financial objects are in the financial objects market index, wherein the weighting is exclusive of a material influence of price of the entities, and wherein the weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.
100871 In another embodiment, the financial objects market index fund is held by, or on behalf of, one or a plurality of investors. In another embodiment, the selecting includes selecting based upon at least one of: a ratio of the accounting data; and/or a manipulation of the accounting data. In another embodiment, the accounting data includes at least one of: relative size of a profits of a the entity; and/or pre-exceptional profits, sales, assets, cash flow, shareholders' equity, and/or a return on investment of a the entity. In another embodiment, the accounting data includes any generally accepted accounting data. In another embodiment, 100881 In another embodiinent, creating the stock market index includes selecting stocks froin a set of entities having a publicly available periodic financial report.
In another embodiment, the set of companies is not substantially equivalent to any one of the S&P 500 Index, and/or the Dow Jones Industrial Average. In another embodiment, selecting includes:
selecting a subset from the set, wherein the set includes at least one of substantially all of the companies having a publicly available periodic financial report, and/or a plurality of subsets of the set. In another embodiment, the set includes a collection of a plurality of partitioned subsets of financial objects. In another embodiinent, wherein the index includes a collection of a plurality of partitioned subindexes. In another embodiment, the index is partitioned into subindexes based on any criterion. In another embodiment, the set includes a group of entities greater than 500 companies. In another embodiment, the set includes substantially all entities having publicly available periodic financial reports.
100891 In another embodiinent, the selecting includes eliminating from the set a subset of entities chosen according to at least one accounting data substantially independent of price. In another embodiment, the weighting includes weighting the remaining companies after the eliminating, according to at least one accounting data. In another einbodiment, the eliminating includes eliminating based on illiquidity. In another embodiment, the financial objects include at least one of: substantially all U.S. financial objects, all financial objects in a market, all stocks in a sector of a market, and/or all stocks in a subset of a market. In another embodiment, the stocks include U.S. stocks. In another embodiment, the financial objects include securities. In another embodiment, the financial objects include cominon financial objects. In yet another embodiment, the financial objects market index fund is held by, or on behalf of, one or a plurality of investors.
100901 In an embodiment, a system is provided, including: an entity database storing aggregated accounting based data about a plurality of entities obtained froin an external data source, each of the entities having at least one asset type associated therewith, the aggregated accounting based data including at least one non-market capitalization objective measure of scale metric associated with each the entity; and an analysis host computer processing apparatus coupled to the entity database, the analysis host computer processing apparatus including: a data retrieval and storage subsystem operative to retrieve the aggregated accounting based data from the entity database and store the aggregated accounting based data to the entity database; an index generation subsystem including: a selection subsystem operative to select a group of the entities based on at least one non-market capitalization objective measure of scale metric; a weighting function generation subsystem operative to generate a weighting function based on at least one non-market capitalization objective measure of scale metric; a index creation subsystem operative to create a non-market capitalization objective ineasure of scale index based on the group of selected entities and the weighting function; and a storing subsystem operative to store the non-inarket capitalization objective ineasure of scale index. An asset type may include a financial object, as well as any other asset type.
100911 In another embodiment, the analysis host computer processing apparatus further includes: a normalization calculation sub-system operative to normalize the data for the at least one non-market capitalization objective measure of scale across the plurality of entities. In another embodiment, the at least one non-market capitalization objective measure of scale metric used by the selection subsysteni differs from the at least one non-market capitalization objective measure of scale metric used by the weighting function generating subsystem. In another embodiment, the at least one non-market capitalization objective measure of scale metric used by the selection subsystem excludes any combination of: market capitalization;
and/or share price.
100921 In another embodiment, the at least one non-market capitalization objective measure of scale metric used by the weighting function generation subsystem excludes any combination of: market capitalization weighting; equal weighting; and/or share price weighting. In another embodiinent, the selection subsystem is operative to: (i) for each entity, assign a percentage factor to each of a plurality of the at least one non-market capitalization objective measure of scale metric, each percentage factor corresponding to the importance of the at least one non-inarket capitalization objective measure of scale metric to the selection;
(ii) for each entity, multiply each of the percentage factors with the corresponding non-market capitalization objective measure of scale metric thereof, to coinpute a selection relevance factor for the entity;
(iii) determine the selected group of entities by: (A) comparing the selection relevance factors for the entities; (B) ranking the entities based on the comparison; (C) selecting a predetermined number of the entities having highest rankings to be the selected group of entities.
100931 In another embodiment, the weighting function generating subsystem is operative to:
(i) for each entity including the selected group of entities, assign a percentage factor to each of a plurality of the at least one non-market capitalization objective measure of scale metric, each percentage factor corresponding to the importance of the at least one non-market capitalization objective measure of scale metric to the weighting; and (ii) for each entity including the selected group of entities, multiply each of the percentage factors with the corresponding non-market capitalization objective measure of scale metric thereof, the corresponding non-market capitalization objective measure of scale metric being a niember of the plurality, to compute an entity function; and (iii) set the weighting function as a combination of the totality of the entity functions.
100941 In another embodiment, each of asset type includes at least one of: a stock; a commodity; a futures contract; a bond; a mutual fund; a hedge fund; a fund of funds; an exchange traded fund (ETF); a derivative; and/or a negative weighting on any asset. In another embodiment, the at least one asset type includes a stock. In another embodiment, the at least one asset type includes a commodity. In another embodiment, the at least one asset type includes a fiitures contract. In another einbodiment, the at least one asset type includes a bond. In another embodiment, the at least one asset type includes a mutual fund. In another embodiment, the at least one asset type includes a hedge fund. In another embodiment, the at least one asset type includes a fund of funds. In another embodiment, the at least one asset type includes an exchange traded fund (ETF). In another embodiment, the at least one asset type includes a derivative. In another embodiment, the at least one asset type includes a negative weighting on any asset type. In another embodiment, the negative weighting is performed for purposes of at least one of establishing and/oi- measuring performance for at least one of:
any security; a portfolio of assets; a hedge fund; and/or a long/short position. In another embodiment, the at least one non-market capitalization objective measure of scale metric includes a measure of size of the entity. In another einbodiment, the measure of size of the entity includes at least one of:
gross revenue; sales; income; earnings before interest and tax (EBIT);
earnings before interest, taxes, depreciation and amortization (EBITDA); number of eniployees; book value; assets;
liabilities; and/or net worth. In another embodiment, the non-market capitalization objective measure of scale metric includes a metric relating to an underlying asset type itself.
100951 In an embodiment, the asset type includes at least one of: a municipality; a municipality issuing bonds; and/or a commodity. In another embodiment, the at least one non-market capitalization objective measure of scale metric includes at least one of: revenue;
profitability; sales; total sales; foreign sales, doinestic sales; net sales;
gross sales; profit inargin;
operating margin; retained earnings; earnings per share; book value; book value adjusted for inflation; book value adjusted for replacement cost; book value adjusted for liquidation value;
dividends; assets; tangible assets; intangible assets; fixed assets; property;
plant; equipment;
goodwill; replacement value of assets; liquidation value of assets;
liabilities; long term liabilities; short term liabilities; net worth; research and development expense; accounts receivable; earnings before interest and tax (EBIT); earnings before interest, taxes, dividends, and amortization (EBITDA); accounts payable; cost of goods sold (CGS); debt ratio; budget;
capital budget; cash budget; direct labor budget; factory overhead budget;
operating budget;
sales budget; inventory systeni; type of stock offered; liquidity; book income; tax income;
capitalization of earnings; capitalization of goodwill; capitalization of interest; capitalization of revenue; capital spending; cash; compensation; employee turnover; overhead costs; credit rating;
growth rate; tax rate; liquidation value of entity; capitalization of cash;
capitalization of earnings; capitalization of revenue; cash flow; and/or future value of expected cash flow.
100961 In an embodiment, the at least one non-market capitalization objective measure of scale metric includes a ratio of any combination of two or more non-market capitalization objective measure of scale metrics. In another embodiinent, the ratio of any combination of the objective measure of scale metrics comprise at least one of: current ratio;
debt ratio; overhead expense as a percent of sales; and/or debt service burden ratio. In another embodiment, the at least one non-market capitalization objective measure of scale metric includes a demographic ineasure.
100971 In an embodiment, the demographic measure of scale includes at least one of: a measure relating to employees; floor space; office space; location; and/or other demographics of an asset. In another embodiment, the measure of size of the entity includes at least a deinographic measure. In another embodiment, the demographic ineasure includes at least one of: a non-financial -netric; a non-market related metric; a number of employees; floor space;
office space; and/or other demographics of the asset. In another einbodirnent, the at least one non-market capitalization objective metric includes a metric relating to geography. In another embodiment, the geographic metric relating to geography includes a geographic metric other than gross domestic product (GDP).
100981 In an embodiment, the system further includes a trading host computer processing apparatus, coupled to the analysis host computer processing apparatus, and operative to construct a portfolio of assets including one or more trading assets, the trading host computer processing apparatus including: an index retrieval subsystem operative to retrieve the non-market capitalization objective measure of scale index; a trading accounts management subsystem operative to receive one or more data indicative of investment amounts from one or more investors; a purchasing subsystem operative to permit purchasing of one or more of the trading assets using the investment amounts based on the non-market capitalization objective measure of scale index.
101001 In an embodiment, the system further includes a trading accounts database coupled to the trading accounts management subsystem, the trading accounts database operative to store the one or more data indicative of the investment amounts. In another embodiment, the system further includes an exchange host computer processing apparatus coupled to the purchasing subsystem, the exchange host coinputer processing apparatus operative to perform one or more functions of the purchasing subsystem. In another embodiment, the asset type includes at least one of: a fund; a mutual fund; a fund of funds; an asset account; an exchange traded fund (ETF);
a separate account, a pooled trust; and/or a limited partnership.
101011 In an embodiment, the system further includes: rebalancing a pre-selected group of trading assets based on the non-market capitalization objective measure of scale index. In another embodiment, the rebalancing is performed on a periodic basis. In another embodiment, the rebalancing is based on the group of assets reaching a predetermined threshold.
101021 In an embodiment, the system further includes: applying one or more rules associated with the non-market capitalization objective measure of scale index. In another embodiment, the system may be used for at least one of: investment management, and/or investment portfolio benchmarking. In another embodiment, the selection sub-system is operative to perforin enhanced index investing, including: computing the portfolio of assets in a fashion wherein at least one of: holdings; performance; and/or characteristics, are substantially similar to an external index. In another embodiment, the weighting subsyste-n is further operative to weight based on a non-financial metric associated with each of the selected group of entities.
101031 In an embodiment, a systein is operative to produce data indicative of the state of a plurality of entities, including: (i) an entity database storing aggregated entity data about the plurality of entities obtained froin an external data source, each of the entities having at least one object type associated therewith, the aggregated entity data including at least one objective metric associated with each entity; (ii) an input/output subsystem; and (iii) an analysis host computer processing apparatus coupled to the entity database via the input/output subsystem, the analysis host computer processing apparatus including: (A) a data retrieval and storage subsystem operative to retrieve the aggregated entity data from the entity database and store the aggregated entity data to the entity database; (B) a data generation apparatus subsystem including: (I) an object selection subsystem operative to select a group of the entities based on a the at least one objective metric; (2) an object weighting function generating subsystem operative to generate a weighting function based on the at least one objective metric; (3) a data creating subsystem operative to create the data based on the group of selected entities and the weighting function; (4) an object storing subsystem operative to store the data; and (5) a displaying subsystein operative to generate for visual display the data indicative of the state of the plurality of entities.
101041 In another embodiment, (i) the data includes an index; (ii) each objective metric includes a non-market capitalization objective measure of scale metric; (iii) each entity data includes a corporate entity data; and (iv) each object type includes an asset data of the entity.
101051 In another embodiment, the analysis host computer processing apparatus further includes: a normalization calculation subsystem operative to normalize the data for the at least one non-market capitalization objective measure of scale metric across the plurality of entities.
In another einbodiment, the at least one objective metric used by the object selection subsystem differs from the at least one objective metric used by the object weighting function generating subsystem. In another embodiment, the at least one object metric used by the object selection subsystem excludes any combination of data regarding: market capitalization;
and/or share price.
101061 In another embodiment, the at least one object used by the object weighting function generating subsystem excludes any combination of data regarding: market capitalization weighting; equal weighting; and/or share price weighting. In another embodiment, the object selection subsystem includes a selection subsystem operative to: (i) for each entity, assigning a percentage factor to each of a plurality of the at least one objective metric, each percentage factor corresponding to the i-nportance of the at least one objective metric to the selection; (ii) for each entity, inultiplying each of the percentage factors with the corresponding objective -netric thereof, to compute a selection relevance factor for the entity; (iii) determining the selected group of entities by: (A) comparing the selection relevance factors for the entities; (B) ranking the entities based on the comparison; (C) selecting a predetermined number of the entities having highest rankings to be the selected group of entities.
101071 In another embodiment, the object weighting function generating subsystem is operative to: (i) for each entity including the selected group of entities, assigning a percentage factor to each of a plurality of the at least one objective metric, each percentage factor corresponding to the importance of the at least one objective metric to the weighting; (ii) for each entity including said selected group of entities, multiplying each of the percentage factors with the corresponding objective metric thereof, the corresponding objective inetric being a member of the plurality, to compute an entity function; and (iii) setting the weighting function as a combination of the totality of the entity functions.
101081 In another embodiment, each of the object types includes data regarding an asset of the entity, said asset including at least one of: a stock; a commodity; a futures contract; a bond; a mutual fund; a hedge fund; a fund of funds; an exchange traded fund (ETF); a derivative; and/or a negative weighting on any asset. In another embodiment, the at least one objective metric includes data regarding the entity, the data including data regarding at least one of: revenue;
profitability; sales; total sales; foreign sales, domestic sales; net sales;
gross sales; profit margin;
operating margin; retained earnings; earnings per share; book value; book value adjusted for inflation; book value adjusted for replacement cost; book value adjusted for liquidation value;
dividends; assets; tangible assets; intangible assets; fixed assets; property;
plant; equipment;
goodwill; replacement value of assets; liquidation value of assets;
liabilities; long term liabilities; short term liabilities; net worth; research and development expense; accounts receivable; earnings before interest and tax (EBIT); earnings before interest, taxes, dividends, and amortization (EBITDA); accounts payable; cost of goods sold (CGS); debt ratio; budget;
capital budget; cash budget; direct labor budget; factory overhead budget;
operating budget;
sales budget; inventory system; type of stock offered; liquidity; book income;
tax income;
capitalization of earnings; capitalization of goodwill; capitalization of interest; capitalization of revenue; capital spending; cash; compensation; employee turnover; overhead costs; credit rating;
growth rate; tax rate; liquidation value of entity; capitalization of cash;
capitalization of earnings; capitalization of revenue; cash flow; and/or future value of expected cash flow.
101091 In another embodiment, the system further includes a trading host computer processing apparatus, coupled to the analysis host computer processing apparatus, and operative to construct a portfolio of assets including one or more trading assets, the trading host computer processing apparatus including: a data retrieval subsystein operative to retrieve the data; a trading accounts manageinent subsystein operative to receive one or more data indicative of investment amounts from one or more investors; a purchasing subsystem operative to permit purchasing of one or more of the trading assets using the investment amounts based on the data.
101101 In another embodiment, the system further includes a trading accounts database coupled to the trading accounts management subsystem, the trading accounts database operative to store the one or more data indicative of the investment amounts. In another embodi-nent, the systein further includes an exchange host coinputer processing apparatus coupled to the purchasing subsystem, the exchange host computer processing apparatus operative to perform one or inore functions of the purchasing subsystem.
101111 In an embodiment, the system may also further include: a rebalancing computational subsystem operative to rebalance a pre-selected group of trading assets based on the data. In another embodiment, the rebalancing computational subsystem performs rebalancing on a periodic basis. In yet another embodiment, the rebalancing computational subsystem performs rebalancing based on the trading assets reaching a predetermined threshold.
101121 Further features and advantages of, as well as the structure and operation of, various embodiments, are described in detail below with reference to the accompanying drawings.

Brief Description of tlre Drawings 101131 The foregoing and other features and advantages of the invention will be apparent from the following, inore particular description of exemplary embodiments of the invention, as illustrated in the accompanying drawings. In the drawings, like reference numbers generally indicate identical, functionally similar, and/or structurally similar elements. The drawing in which an element first appears is indicated by the leftmost digits in the corresponding reference number. A preferred exemplary embodiment is discussed below in the detailed description of the following drawings:
101141 FIG. I is a deployment diagram of an index generation and use process in accordance with an exemplary embodiment of the present invention;
101151 FIG. 2 is a process flow diagrain of an index generation process in accordance with an exemplary embodiment of the present invention;
101161 FIG. 3 is a process flow diagrain of an index use process in accordance with an exemplary embodiment of the present invention;
101171 FIG. 4 is a process flow diagram of a method of creating a portfolio of financial objects;
101181 FIG. 5 is a process flow diagram of a method of constructing an ADBI
and a portfolio of financial objects using the ADBI;
101191 FIG. 6 depicts an exemplary einbodiment of a coinputer system as may be used in the analysis host, trading host, or exchange host, according to an exemplary embodiment;

101201 FIG. 7 depicts an exemplary embodiment of a chart graphing cumulative returns by date for exemplary high yield debt instrument metrics according to an exemplary embodiment;
101211 FIG. 8 depicts a block diagram of an exemplary embodiinent of a systein according to an exemplary embodiment;
101221 FIG. 9 depicts an exemplary embodiment of a chart graphing cunnulative returns by date for exemplary emerging market debt instrument metrics according to an exemplary embodiment;
101231 FIG. 10 depicts an exemplary embodiment of a chart graphing cumulative returns by date for exemplary emerging market debt instrument metrics illusti-ating growth of an exemplary investment, according to an exemplary embodiment; and 101241 FIG. I I depicts an exemplary embodiment of a chart graphing a rolling 36-month value added composite exemplary emerging market debt instrument metrics vs.
cap-weighted emerging market bonds, according to an exemplary embodiment.

Detailed Description of E.Yemplary Embodiments 101251 Various exemplary embodiments are discussed in detail below including a preferred embodiment. While specific implementations are discussed, it should be understood that this is done for illustration purposes only. A person skilled in the relevant art can recognize that other components, configurations, accounting data, and ratios may be used without parting from the spirit and scope of the invention.

Exemplary Conclusions 101261 The inventors have arrived at numerous conclusions upon which the embodiinents are established, including that cap-weighting is not mean-variance optimal.
The latter conclusion holds because weighting scheines based on market price, including cap-weighting, overweight 100% of overvalued stocks and underweight 100% of undervalued stocks. Both mathematically and empirically, this over and under weighting problem inherent to cap-weighting leads to a return drag of 200 bps per year in the U.S. and more than 200 bps per year internationally.
101271 One example of the phenomenon comes from the recent stock market bubble of 1997 - 2000, when, e.g., Internet network service provider Cisco comprised nearly 5% of the S&P
500. At its peak in 2000, Cisco traded at $70 per share. Since March 2000, Cisco has fallen to ~, ~3 approximately 12% of its peak, dragging down S&P 500 performance of which it comprised 5%.
101281 While it is difficult or impossible to know the true fair value of a company, what is known is that if an overvalued company"s weight in an index is determined by market capitalization, then the company will be over-weighted in the index.
Conversely, if a company's weight is determined by market capitalization and it is undervalued, it will be underweighted in a capitalization-weighted index.
101291 Over the past 40 years, the largest stock by market capitalization in the S&P 500 has underperformed the average stock in the index over a I0-year time period by an average of 40%.
The largest 10 stocks by market capitalization have underperformed the average stock over the subsequent 10-year time frame by an average of 26%. Yet, cap-weighted indexes continue to invest 20-30% of their value in the largest 10 stocks by market cap, despite the fact that they under-perform the average stock in the index, because the stocks are selected and weighted using market capitalization, which by its nature over-weights over valued stocks and under-weights undervalued stocks. The various exemplary embodiments overcome the shortcomings of the investment community.

Various E.vemplary Embodinrents Further Described 101301 As used herein, references to "one embodiment," "an embodiment, "
"example embodiinent," "various embodiments," etc., may indicate that the embodiment(s) of the invention so described may include a particular feature, structure, or characteristic, but not every embodiment necessarily includes the particular feature, structure, or characteristic. Further, repeated use of the phrase "in one embodiment," or "in an exemplary embodiment," do not necessarily refer to the same embodiment, although they may.
101311 In the following description and claims, the terms "coupled" and "connected," along with their derivatives, may be used. It should be understood that these terins are not intended as synonyms for each other. Rather, in particular embodiments, "connected" may be used to indicate that two or more elements are in direct physical or electrical contact with each other.
"Coupled" may mean that two or more elements are in direct physical or electrical contact.
However, "coupled" may also mean that two or more elements are not in direct contact with each other, but yet still co-operate or interact with each other.

101321 One or more exemplary embodiments of various exemplary einbodiments, including but not liinited to a trading system, a selecting system, a weighting system, an investment system, a portfolio inanagement system, an index manager system, a database system, a metric storage and/or analysis systein, to name a few, may be implemented on, with, or in relation to a computing device(s), processor(s), computer(s) and/or cominunications device(s).
101331 The computer, in an exemplary embodiment, may comprise one or more central processing units (CPUs) or processors, which may be coupled to a bus. The processor inay, e.g., access main memory via the bus. The computer may be coupled to an input/output (I/O) subsystem such as, e.g., but not limited to, a network interface card (NIC), or a modem for access to a network. The computer may also be coupled to a secondary memory directly via bus, or via a main memory, for example. Secondary memory may include, e.g., but not limited to, a disk storage unit or other storage medium. Exemplary disk storage units may include, but are not limited to, a magnetic storage device such as, e.g., a hard disk, an optical storage device such as, e.g., a write once read many (WORM) drive, or a compact disc (CD), a digital versatile disk (DVD), and/or a magneto optical device. Another type of secondary memory may include a removable disk storage device, which may be used in conjunction with a removable storage medium, such as, e.g. a CD-ROM, a floppy diskette or flash drive, etc. In general, the disk storage unit may store an application program for opei-ating the computer system referred to conunonly as an operating system. The disk storage unit may also store documents of a database (not shown). The computer may interact with the I/O subsystems and disk storage unit via bus. The bus may also be coupled to a display for output, and input devices such as, but not Iimited to, a keyboard and a mouse or other pointing/selection device.
101341 In this document, the terms "computer program medium" and "computer readable medium" may be used to generally refer to storage media such as, e.g., but not li-nited to, a removable storage drive, or a hard disk installed in hard disk drive, etc.
These computer program products may provide software to the computer system. The invention may be directed to such computer program products.
101351 An algorithm is here, and generally, considered to be a self-consistent sequence of acts or operations leading to a desired result. These include physical manipulations of physical quantities. Usually, though not necessarily, these quantities take the form of electrical or magnetic signals capable of being stored, transferred, combined, compared, and otherwise manipulated. It has proven convenient at times, principally for reasons of common usage, to refer to these signals as bits, values, elements, symbols, characters, terms, numbers or the like.
It should be understood, however, that all of these and similar tenns are to be associated with the appropriate physical quantities and are merely convenient labels applied to these quantities.
101361 Unless specifically stated otherwise, as apparent from the following discussions, it is appreciated that throughoirt the specification discussions utilizing terms such as "processing,"
"computing," "calculating," "determining," or the like, refer to the action and/or processes of a computer or computing system, or similar electronic computing device, that manipulate and/or transform data represented as physical, such as electronic, quantities within the computing system's registers and/or memories into other data similarly represented as physical quantities within the computing system's memories, registers or other such information storage, transmission or display devices.
101371 In a similar manner, the term "processor" may refer to any device or portion of a device that processes electronic data from registers and/or memory to transform that electronic data into other electronic data that may be stored in registers and/or memory.
A"computing platform" may comprise one or more processors.
101381 Embodiments of the present invention may include apparatuses for performing the operations herein. An apparatus may be specially constructed for the desired purposes, or it may comprise a general purpose device selectively activated or reconfigured by a progra-n stored in the device. The foregoing co-nputer and/or cominunications related embodiments are described with greater specificity in the embodiments that follow.

Exemplary Process of Constructing Exemplary Accounting Data Based lndexes 101391 A financial object, according to one exemplary embodiment, may include:
at least one unit of interest in at least one of: an asset; a liability; a tracking portfolio; a financial instrument and/or a security, where the financial instrument and/or the security denotes a debt, an equity interest, and/or a hybrid; a financial position, a currency position, a trust, a real estate investment trust (REIT), a portfolio of trusts and/or REITS, a security instrument, an equitizing instrument, a commodity, a derivatives contract, including at least one of: a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability; a fund;
and/or an investment entity or account of any kind, including an interest in, or rights relating to:

a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investinents. In an exemplary embodiment, the financial object may include a debt instrument, including, according to one exemplary embodiment, any one or more of a bond, a debenture, a subordinated debenture, a mortgage bond, a collateral trust bond, a convertible bond, an income bond, a guaranteed bond, a serial bond, a deep discount bond, a zero coupon bond, a variable rate bond, a deferred interest bond, a commercial paper, a government security, a certificate of deposit, a Eurobond, a corporate bond, a government and/or institutional debt instrument, a municipal bond, a treasury-bill, a treasury bond, a foreign bond, an emerging market bond, a high yield bond, a junk bond, a collateralized instrument, an exchange traded note (ETN), and/or other agreements between a borrower and a lender. The foregoing list is non-exhaustive, and a financial object may include at least the types of objects listed throughout this document as qualifying as a financial object, respectively.
101401 FIG. I depicts an exemplary deployment diagram 100 of an index generation and use process in accordance with an exemplary embodiment of the present invention.
According to the exemplary einbodiment, an analyst may use a computer system 102 to generate an index 110. The analyst may do so by using analysis software 114 to examine data 106 about entities offering different kinds of financial objects that may, for example, be traded by investors. An example of an entity that may be offering financial objects may be a publicly held company whose shares trade on an exchange. However, the present embodiments also apply to any entity that may have any type of financial object that may, for example, be traded, and where, for example, information about the entity and/or its financial objects inay be available (or capable of being made available) for analysis.
101411 In an exemplary einbodiment, once index 110 has been generated by an analyst using the entity data 106, index I10 may be used to build one or more portfolios, for example, investment portfolios. An investor, advisor, manager or broker may then manage the purchased financial objects, for example, as a mutual fund, an electronic traded fund, a hedge fund or other portfolio or account of assets for one or for a plurality of, for example, individual and/or institutional investors. The investor, advisor, manager or broker may use a trading computer system 104 with trading software 116 to manage one or inore trading accounts 108.
Alternatively, the purchased financial objects may be managed for one or more investors. In the latter case, financial objects may be purchased based on the index for inclusion in an individual or an institutional investor's portfolio. One or niore trades may be effected or closed in cooperation with and via communication with an exchange host system 112. The present embodiinents are not Iimited to the foregoing technologies, and may include at a minium, the various technologies, including coinputer and/or communications systeins specified elsewhere herein.
101421 FIG. 2 depicts an exemplary process flow diagram 200 of an index generation process in accordance with an exemplary embodiment of the present invention.
In an exemplary embodiment, starting at block 202, to generate index 110, an analyst using analysis software and/or hardware system 114 may access entity data 106 about various entities that have financial objects that are traded. For example, publicly traded companies must disclose information about certain financial aspects of their operations. This information may be aggregated for a plurality of entities. Market sectors and corresponding indices may then be identified and generated using the aggregate data.
101431 In slightly more detail, an index 1 10 inay be generated and/or stored by, for example, normalizing entity data for a particular non-market capitalization metric in block 204. The nori-nalized entity data inay be used to generate a weighting function, in block 206, describing the contribution of each entity to a business sector as defined by the metric, in an exemplary embodiment. Index 110 may be generated using the weighting function in block 208. The process may end at block 210. Once index 110 is generated, according to an exemplary embodiment, index 110 may be used to track the business sector defined by the metric or to create a portfolio of financial objects offered by the entities whose information was used to generate the index.
101441 For example, in an exemplary embodiment a method of constructing a non-capitalization weighted portfolio of financial objects may include, e.g., gathering data about various financial objects; selecting a group of financial objects to create the index of financial objects; and/or weighting each of the group of financial objects selected in the index based on an objective measure of scale and/or size of each member of the group of financial objects, where the weighting may include weighting all or a subset of the group of financial objects, and weighting based on factors other than market capitalization, equal weighting, or share price weighting.
101451 In one exemplary embodiment, the weighting of each member of the group of financial objects may include weighting financial objects of any of various types. Examples of various types of financial objects may include, for exainple, but not be limited to, a stock type; a commodity type; a futures contract type; a bond type; a currency type; a mutual fund type; a hedge fund type; a fund of funds type; an exchange traded fund (ETF) type;
and/or a derivative type asset, and/or any other portfolio or account of financial objects, to name a few. In fact, any of the types of financial objects specified above and elsewhere herein may be weighted. The weighting may also include, e.g., but not limited to, a negative weighting on any of the various types of financial objects.
101461 According to exemplary embodiments of the present invention, the index 1 10 may be weighted based on an objective measure of scale and/or size, where the objective measure of scale and/or size inay include a measure relating to an underlying asset itself. The financial object may include, for example, a government and/or a municipality, a government and/or municipality issuing bonds, a government and/or niunicipality issuing currency, a government and/or municipality issueing a commodity, and/or a government and/or municipality issuing a com-nodity, to name a few. An objective measure of scale and/or size associated with the financial object may include, for example, any combination or ratios of:
revenue, profitability, sales, total sales, foreign sales, domestic sales, net sales, gross sales, profit margin, operating margin, retained earnings, earnings per share, book value, book value adjusted for inflation, book value adjusted for replacement cost, book value adjusted for liquidation value, dividends, assets, tangible assets, intangible assets, fixed assets, property, plant, equipment, goodwill, replacement value of assets, liquidation value of assets, liabilities, long term liabilities, short term liabilities, net worth, research and development expense, accounts receivable, earnings before interest, taxes, dividends, and amortization (EBITDA), accounts payable, cost of goods sold (CGS), debt ratio, budget, capital budget, cash budget, direct labor budget, factory overhead budget, operating budget, sales budget, inventory method, type of stock offered, liquidity, book income, tax income, capitalization of earnings, capitalization of goodwill, capitalization of interest, capitalization of revenue, capital spending, cash, compensation, employee turnover, overhead costs, credit rating, growth rate, dividends, dividends per share, dividend yields, tax rate, liquidation value of company, capitalization of cash, capitalization of earnings, capitalization of revenue, cash flow, and/or future value of expected cash flow. Further, if the financial object is associated with country or sovereign, such as, for example, emerging market debt instruments or currency and currency related debt instruments, an objective measure of scale and/or size associated with the financial object inay include any combination or ratio of:

economic factors, demographic factors, social factors political factors, the population, area, geographic area gross domestic product (GDP), GDP growth, natural resources, oil (or any other energy source) consumption, expenditures, government expenditures, gross national income (GNI), measures of freedom, democracy, and corruption, rate of inflation, rate of unemployment, reserves level, and/or total debt, nominal interest rates and the ratios of nominal interest rates between issuing sovereign entities; commercial paper yield inetric; credit rating metric; consumer price index (CPI); purchasing power of local currency metric;
metrics measuring relations between the purchasing power of local currency metric and nominal exchange rates and deviations from historical trends in such metrics; and/or government exchange rate reginie; a per capita ratio of any of the foregoing or any other characteristic.
101471 Ratios too inay be used. In an exemplary embodiment, the weighting of financial objects in the index based on objective ineasures of scale and/or size inay include a ratio of any combination of the objective measures of scale and/or size of the financial object other than ratios based on weighting the financial objects based on market capitalization, equal weighting, or share price weighting. For example, the ratio of any combination of the objective measures of scale and/or size may include, e.g., but not Iimited to, current ratio, debt ratio, overhead expense as a percent of sales, or debt service burden ratio.
101481 In an exeinplary embodiment, the portfolio of financial objects may include, e.g., but not Iimited to, one or more of, a fund; a mutual fund; a fund of funds; an asset account; an exchange traded fund (ETF); and/or a separate account, a pooled trust; a limited partnership and/or other legal entity, fund or account.
101491 In an exemplary embodiment, a measure of company size may include one of, or a combination of one or more of, gross revenue, sales, income, earnings before interest and tax (EBIT), earnings before interest, taxes, depreciation and amortization (EBITDA), number of employees, book value, assets, liabilities, net worth, cash flow or dividends.
101501 In one exeinplary embodiment, the measure of company size may include a demographic measure of the financial object. The demographic measure of the financial object may include, e.g., one of, or any combination of one or more of a non-financial metric, a non-market related metric, a number of employees, floor space, office space, or other deinographics of the financial object.
101511 In an exemplary embodiment, weighting may be based on the objective measure of scale and/or size, where the measure may include a geographic metric. The geographic metric in an exemplary embodiment may include a geographic metric other than gross domestic product (GDP) weighting.
101521 FIG. 3 depicts an exemplary process flow diagram 300 of an index use process in accordance with an exemplary embodiment of the present invention. The process starts at block 302. An index 310 may be received froin an index generation process and may be used to determine the identity and quantity of securities to purchase for a portfolio in block 304, according to an exemplary embodiment. The securities may be purchased, in block 306, from an exchange 3 14 or other market and may be held on account for an investor or group of investors in trading accounts 308. The index 310 may be updated on, e.g., but not limited to, a periodic basis and may be used as a basis to rebalance the portfolio, according to an exemplary embodiinent. According to another exemplary embodiment, the portfolio can be rebalanced when, e.g., a pre-determined threshold is reached. In this way, a portfolio may be created and maintained based on a non-market capitalization index.
101531 Rebalancing can be based on financial objects reaching a threshold condition or value. For example, but not Iimited to, rebalancing may occur upon reaching a threshold such as, e.g., `when the portfolio of financial objects increases in market value by 20%,' or `when the financial objects on a sub-category within the portfolio exceed 32% of the size of the portfolio,' or `when a U.S. President is elected from a different party than the incumbent,' etc. Rebalancing may take place periodically, e.g., quarterly, or annually.
101541 The present invention, in an exemplary embodiment, may be used for investment management, or investment portfolio benchmarking.
101551 Another exemplary embodiment of the present invention may include an Accounting Data Based Index (ADBI) such as, e.g., but not liinited to, a FUNDAMENTAL
INDEX and Index Fund or Funds.
101561 This exemplary embodiment inay utilize a new series of accounting data based stock market indices in which the index weightings may be determined by company accounting data such as, e.g., but not liinited to, the relative size of a company's profits, or its pre-exceptional profits, or sales, or return on investment or any accounting data based accounting item, or ratio, may help to address some of the issues raised above. An index that is weighted based on company accounting data, rather than the share price, or market capitalization or equal weighting, may have a stabilizing element within it that can help to remove excess volatility generated by indices constructed on the basis of price or market capitalization alone. Over the inedium to longer term, such accounting data based indices have the potential to outperform price or marhet capitalization-based indices, and may do so with less volatility.
101571 The exemplary method may create a new class of stock market indices and index funds that may be implemented on, e.g., but not limited to, a computing device or a processor, or as a computer software or hardware, or as an algorithm. This new class of stock market indices may base its weightings on the accounting data of the companies that make up that index. One possible version of an accounting data based stock market index may be an index that is based on the relative size of a sample of the companies' pre-exceptional profits. If the chosen sample of companies was determined to be one hundred and the accounting data based criteria that the index manager decided to use was to be 'largest pre-exceptional profits,' then the index may contain, e.g., the one hundred largest companies as defined by the size of their pre-exceptional profits. As an example, if the total pre-exceptional profits of the largest one hundred companies, as measured by their pre-exceptional profits, was 100 dollars, pounds, or other currency, in a defined time period (such as a quarter or year) and in the same time period the pre-exceptional profits of theoretical company `A' were $2, then theoretical company A would be allocated a 2%
weighting in the accounting data based index, in an exemplary embodiment. If theoretical company B had pre-exceptional profits of $1.5 over the same time period then it would have a weighting of 1.5% in the accounting data based index according to an exemplary einbodiment.
101581 The index weightings may be managed based on how the "fundamentals" of the companies within, or outside, the chosen index sample may change. As an example, the index manager could choose to rebalance the weightings from time to time such as, e.g., but not limited to, periodically, aperiodically, quarterly, as company pre-exceptional profits change, and/or on an annual basis, etc., and enter their choice into, e.g., a computing device. If, for instance, by the time of the next rebalancing period the total pre-exceptional profits of the largest one hundred companies, as measured by their pre-exceptional profits, had grown to $120, and theoretical coinpany A now had pre-exceptional profits of $1.2, the computing device may calculate the weighting of company in the accounting data based index such as, e.g., the accounting data based index down to 1% from 2% in the previous period.
Creating such accounting data based indices may give an investor the opportunity to follow, or invest, passively in an index which may be anchored to the economic realities of the companies within it. This new accounting data based index construction technique by a computing device may produce an index and related index fund products with increased stability and with increased economically rational behavior as compared with known methods of investing.
101591 The foregoing index weighting and rebalancing as performed on a computing device inay also be applied to indices constructed of financial objects including emerging market debt instruments, or currency and related debt instruments, or commodities and related debt instruments, or Real Estate Investment Trusts. Each index may be based on the one or more accounting metrics relevant to the financial object of which the index is composed. For example, an index of currency and related debt instrLnnents may be based on the GDP of the country or sovereign responsible for issuing the currency.

Accounlinb Data Based Inde.itrlion (A DBI) 101601 In one exemplary embodiment, a computing device may create an accounting data based stock market index (ADBI) such as, for example, an accounting data based stock market index by using any of the accounting data based data points regarding a company or a group of companies that can be found in a company's annual report and accounts. In one exemplary embodiinent, the computing device may create an index of companies based on the relative size of the coinpanies' sales, assets, profits, cash flow or the shareholders equity. In addition, the computing device can also create the ADBI by using a ratio of any of the data concerning a company or group of companies that may be contained in a company report and accounts. In one exemplary embodiment, this could include the relative size of the return on financial objects of a selection of companies, their return on investment, or their return on capital compared to their cost of capital. In another exemplary embodiment, the computing device may create an index of objects, wherein the objects are associated, for example, with a country or soverign, where the index is created based on any of the foregoing metrics for countries and sovereigns.
101611 Once the index manager syste-n has decided and entered which accounting data based criteria to use and how many constituents the manager system may decide to include in the index, the computing device may create the index in the following way. If, for example, the index manager decides to construct an accounting data based stock market (or other securities or financial object) index of one hundred constituent members and decides to use pre-exceptional profit as the chosen accounting data based criteria, the computing device may create the index as follows. First, the computing device may perform a search to find which are the largest one hundred listed companies as defined by the size of their pre-exceptional profits. Once the computing device has identified this information, the computing device may be ready to construct the index. Companies niay be accorded index weightings based on the relative size of their pre-exceptional profits. If the combined pre-exceptional profits of the one hundred companies is $100 and theoretical company A has pre-exceptional profits of $2, then it may have an index weighting of 2%. Once the one hundred companies niay have been accorded their weightings, the computing device niay begin to calculate future index performance as the share prices of the different companies in the index changes from day to day. This may be achieved by assuming a starting value for the index, or index portfolio, and then calculating how each of the index constituents may perform going forward.
101621 The computing device may then rebalance the index weightings as the accounting data based data points change over time as desired by the investor. For instance, if at the end of the next company reporting season the combined pre-exceptional profits of the one hundred largest companies had grown from $100 to $120 and the pre-exceptional profits of theoretical company A had declined from $2 to $1.2, the computing device may determine its weighting in the index would decline from 2% in the prior period to 1% in the current period. Also, some of the original companies in the first one hundred may be eliminated from the index if their pre-exceptional profits fall below a certain level while new companies that were not in the original sample may be included. The coinputing device, under the direction of an investor, may choose to rebalance the weightings in the index, e.g., but not limited to, as individual coinpanies report their pre-exceptional profits on a quarterly basis, and/or waiting until the majority of companies have reported their pre-exceptional profits and then adjusting them all at once. Also, the computing device, under the direction of an investor, could choose to deterinine the weightings based on, e.g., but not limited to, either the total noniinal amount of pre-exceptional profit each quarter or on a cumulative rolling basis.
101631 Constructing a stock market (or other security or financial object) index according to an exemplary embodiment using accounting data based company accounts data or a ratio, or manipulation of that data may provide a series of genuine alternatives for investors who want to invest in a passive style while focusing on fundamentals that they believe are important. For instance, according to an exemplary embodiment an investor may always want to own an index of U.S. or foreign equities that are, e.g., the largest five hundred companies as measured by sales, or by profits, or by growth in sales, or by return on investment, or any accounting data based company accounts data or ratio of that data.

101641 In accordance with certain embodiments, a portfolio generated based on an ADBI
index may be passively managed, actively managed, and/or may be managed partially passively and/or or actively. In an exeinplary embodiment, a passively managed portfolio may be categorized as objective, rules-based, transparent, and/or replicable.

E.vemplary Lona-Short Equity Strategies 101651 An exemplary embodiment of the present invention may take long and short positions based on an extent to which accounting data based indexation suggests that equities are under or over valued.
101661 FIG. 4 illustrates an exemplary process flow diagram 400 of a method of creating a portfolio of financial objects according to an embodiment of the present invention. In block 402 the process starts. In block 404, a determination is made of overlapping financial objects that appear in both an accounting data based index (ADBI) 410 and a conventional weighted index 412. In block 406, the weightings of the overlapping financial objects in the ADBI are compared with the weightings of the overlapping financial objects in the conventionally weighted index. Then, in block 408, one or more of the overlapping financial object may be purchased based on the result of the compai-ison.
101671 In the alternative, exemplary embodiments of the present invention may determine non-overlapping financial objects appearing in only one of either an accounting data based index (ADBI) or a conventional weighted index by comparing financial objects in an ADBI with financial objects in a conventionally weighted index. Non-overlapping financial objects appearing only in the ADBI may be weighted by accounting data based weighting.
Non-overlapping financial objects appearing only in the conventionally weighted index may be weighted by the conventional weighting. Financial objects may then be purchased based on the resulting weightings.
101681 In an exemplary embodiment, an index of the largest 1,000 U.S.
equities, weighted by accounting data, may overlap an index of the largest 1,000 U.S.
capitalization-weighted companies by approximately 80%. The 20% of non-overlapping companies may drive the 2.0%
increase in return of an accounting data based index such as, e.g., but not Iiinited to, RESEARCH AFFILIATES Fundamental Index (RAFI(@) available from Research Affiliates, LLC of Pasadena, CA, versus a cap-weighted index. A long-short strategy according to an exemplary embodiment is designed to leverage this 20% of companies that do not overlap, and may capture the expected alpha from the accounting data based indexation. An exemplary long-short U.S. equity strategy may be approximately beta and dollar neutral and can replace or complement inai-ket neutral or long-short strategies, or as part of a portfolio's alternative strategies bucket.
101691 Accounting data based indexation may use economic measures of company size in constructing indexes. Using accounting data based economic measures of firm size may create an index that is indifferent to price. Accounting data based indexes may avoid flaws inherent in capitalization (price)-weighted indexes. Capitalization-weighted indexes naturally overweight overvalued stocks and underweight undervalued stocks. Accounting data based indexes may more accurately estimate a true fair value of a company, allowing the weight of a company's stock in the index to rise or fall only to the extent that the underlying economic value of the issuing company may rise or fall.

ADB/ Portfolio Construction 101701 FIG. 5 illustrates an exeinplary flow process diagram 500 of a method of constructing an ADBI and a portfolio of financial objects using the ADBI, starting at block 502.
In block 504, the ADBI 510 may be created. Creating the ADBI may include, in block 506, selecting a universe of financial objects, and, in block 508, selecting a subset of the universe based on the accounting data to obtain the ADBI 510. Step 504 (not shown) may include weighting the selected financial objects according to a measure of value of an entity (for exainple, a company and/or government) associated with each financial object.
(Refer to step 206.) Then, in block 512, a portfolio of financial objects may be created using the ADBI 510, including using the weighting of the financial objects in the portfolio according to a measure of value of a company and/or issuer of the financial object associated with each financial object in the portfolio.
101711 In one or more embodiments, stratified sampling may be used. For example, the portfolio may not purchase all of the financial objects in the ADBI, and instead utilize a sampling methodology in order to obtain a portfolio correlation objective. An exemplary sainpling may use quantitative analysis to select securities from the ADBI
universe to obtain a representative sample of financial objects, that, for example, resemble the ADBI with respect to a nuinber of factors, including for example, key risk factors, performance attributes, and other characteristics. Exemplary additional characteristics inay include industry weightings (see Table I); market capitalization; and/or other financial characteristics of the financial objects. The quantity of holdings in the portfolio may be based, for example, on a number of factors, including asset size of the portfolio, and other factors. The portfolio may be managed to hold less than or equal to the total number of financial objects in the ADBI. In an exemplary enibodiment, in purchasing a portfolio based on the ADBI a correlation goal between the portfolio's performance and the performance of the ADBI may be set, such as, for example, 0.95 or better. A figure of 1.00 would represent perfect correlation between the portfolio's performance and ADBI.
101721 According to an exemplary embodiment, a factor inay be used to divide up the universe of financial objects of the ADBI into sub-universes (groups / strata) and one may expect the measurement of interest to vary among the different sub-universes.
This variance may have to be accounted for when selecting the sainple from the universe in order that the sample obtained is representative of the universe. This inay be achieved by stratified sampling. A
stratified sample may be obtained by taking samples from each of a plurality of stratum or sub-groups of a universe. When one samples a universe with several strata, generally the proportion of each stratum in the sample should be the same as in the universe.
Stratified sampling techniques may be used when the population of the universe is heterogeneous, or dissimilar, where certain homogeneous, or similar, sub-populations (i.e., sub-universes) can be isolated (strata). Simple random sampling is most appropriate when the entire population from which the sample is taken is homogeneous. Some reasons for using stratified sampling over simple randoin sampling may include: (i) the cost per observation in the survey may be reduced; (ii) estimates of the population parameters may be wanted for each sub-population; and/or (iii) increased accuracy at given cost.
101731 To construct an exemplary accounting data based index (ADBI), such as, e.g., but not Iimited to, the RESEARCH AFFILIATES FUNDAMENTAL INDEX (RAFI ), some number of financial objects, e.g., 1000 US equities, may be selected and/or weighted based on the following four accounting data based measures of company size: book equity value, free cash flow, sales, and actual gross dividends paid, if any. In an exemplary embodi-nent, when calculating the variable for dividends, actual dividends paid plus stock buybacks minus new issues of stock are calculated. According to another exemplary embodiment, additional factors, including but not limited to, country factors, industry metrics, accounting data metrics, non-financial metrics, etc., may be used. In an exemplary embodiment, weighting may include weighting by current and/or trailing historical accounting data, and in a related embodiment, a five year weighted average and equal weighting for each of objective metrics (for example, book value, revenue, cash flow and dividends) may be used. In another related embodiment, such metrics may be weighted to include any one of current fundamental accounting measures, past fundainental accounting measures, and/or a mathematical blend of the two.
101741 In an exemplary embodiment for debt instruments, weighting by metrics relating to governmental and/or institutional debt instruments may include, but not be liniited to, duration, credit rating, convexity, credit risk, spread, optionality factors, yields, collateralization, priority, interest rate, financing restrictions, maturity date, limitations on dividends and/or market interest rates, the latter which may be inversely related to debt instrument prices.
101751 An exemplary embodiment of an accounting data based index such as, for example, but not limited to, the RAFIOO index may weight all the securities (financial objects) by each of the at least four accounting data based measures of scale and/or size detailed above. According to an exemplary embodiment, an optimal relative weighting between the four factors may differ by geography of the market from which the financial objects are selected such as, e.g., an equal weighting -nay be optimal in one country or industry sector, while a different relative weighting between the factors may make sense in another country or industry sector. The index may then compute an overall weight for each holding by equally-weighting each of the four accounting data based measure of firm size according to an exemplary embodiment. For example, assuine that a company has the following weights: 2.8% of total US book values, 2% of total US cash flow, 3% of total US sales, and 2.2% of total US dividends. Relative weightings of each factor or metric may be varied, in one exemplary embodiinent, such as, e.g., but not Iimited to, increased weighting for one of the selected variables, 101761 Equally-weighting any of these at least four accounting data based measures of finn size (i.e., book value, cashflow, sales and dividends) may produce a weight of 2.5%. According to an exemplary embodiment, for companies that have never paid dividends, one may exclude dividends from the calculation of the coinpany's accounting data based weight and may weight the remaining variables equally. Finally, in an exemplary embodiment, the 1000 equities with the highest accounting data based weights inay be selected and may be assigned a weight in the RAFIO portfolio equal to its accounting data based weight.
101771 According to another exemplary embodiment, an accounting data based index such as, e.g., but not limited to, RAFIOO maybe constructed using aggregate (not per-share) measures of firm size. For example, RAFIO may use total firm cash flow instead of cash flow per share and total book value instead of book value per share in its construction.
101781 In an exemplary embodiment, the accounting data may include at least the following four factors, book value, sales/revenue, cash flow and dividends. In another exemplary embodiment, only one or more of these factors may be used. In another exemplary embodiment, additional factors may be used, such as, e.g., any other accounting data. In one exemplary embodiment, the weightings of each of these factors may be equal relative to one another, i.e., 25% of each of book value, sales/revenue, cash flow and actual paid dividends, if any. In another exemplary embodiment the weightings of each of these factors may be based on either current fundamental accounting measures, past fundamental accounting measures, or a inathematical blend of the two In one exemplary embodiment, if there are no dividends, then the other three factors may be weighted in equal parts, i.e., 33% each to book value, sales/revenue, and cash flow. In another exemplary embodiment, dividends may be weighted in a greater part such as, e.g., but not Iimited to, weighting dividends at 50%
and book value, sales/revenue, and cash flow at 1/6th each, etc. In one exemplary embodiment, weightings may be the same, depending on the country or sovereign of origin or the industry sector of the stock or other financial object. In another exemplary embodiment, weightings may vary depending on the country or sovereign of origin or the industry sector of the stock or other financial object. In another exemplary embodiment, weightings may vary based on other factors, such as, e.g., but not limited to, types of assets, industry sectors, geographic sectors, countries, sizes of companies, profitability of companies, amount of revenue generated by the company, etc.
101791 An accounting data based index may be available in several varieties to meet the unique needs of different classes of retail and institutional investors, including, e.g., but not Iimited to, as enhanced portfolios, Exchange Traded Funds (ETFs), passively managed funds, enhanced funds, active funds, collective investment trusts, open-end mutual funds, tax managed portfolios, a collection of financial objects managed collectively but tracked separately, separately managed accounts, other commingled funds/accounts and/or closed-end mutual funds. Various US and international investment managers may offer, e.g., but not limited to, a suite of products.
101801 A commingled account or other fund or separately managed account investing in assets based on an Accounting Data Based Index, such as, e.g., Research Affiliates Fundamental IndexO, L.P. (RAFIO LP) may increase the alpha generated by accounting data based indexation in the US through improvements or enhancements, including, e.g., but not limited to, monthly cash rebalancing and quality of earnings and corporate governance screens. The additional enhancements may be expected to add additional performance above what may be achieved through the use of accounting data based indexing in portfolio construction.
101811 A commingled account or other fund or separately managed account investing in assets based on an ADBI international LP such as, RAFIO International LP
(RAFIO-I may apply accounting data based indexation to the international equity space in an exemplary embodinient to create an enhanced portfolio of, e.g., but not limited to 1000 international (ex-US) equities. RAFIO-I may be expected to outperform capitalization weighted indexes. RAFIO-I is an enhanced portfolio that may use monthly cash rebalancing and quality of earnings and corporate governance screens to improve upon the performance of the RAFIO
International index.
101821 Open-end mutual funds may manage financial objects employing a fixed income strategy and portable alpha using the Accounting Data Based Index (ADBI) according to an exemplary embodiinent.
101831 An Exchange Traded Fund (ETF) of the ADBI such as, e.g., but limited to, POWERSHARES FTSE RAFIO US 1000 Portfolio ETF (ticker symbol: PRF) may meet needs of retail and institutional investors interested in a low-cost means of accessing the power of accounting data based indexing in another exemplary embodiment.
101841 Another exemplary einbodiment includes a closed-end fund implementing accounting data based indexing such as, e.g., Canadian Fundainental Income 100, a closed-end mutual fund of the largest 100 accounting data based equities in Canada which attracted investments from retail and institutional investors in 2005, one of the most difficult closed end markets in recent history, demonstrating the strength of the accounting data based indexation strategy.

Exeniplary Sector A DBI Indexes 101851 According to one exemplary embodiment, a universe may be selected where the universe includes one or more sectors, and the weightings may be based on one or more sector metrics or measures. A non-exclusive list of exemplary sectors is shown in Table 1, which is based on North American Industry Classification System (NAICS) sectors. A non-exclusive list of industry sector metrics that be used in selecting and/or weighting, for example, financial objects, is shown in Table 2.
Table I
Exemplary List of Sectors (based on NAICS sectors) Agriculture. Forestry, FishinQ atid Fluntina Mining Utilities Construction ManLifacttiriiig Wholesale "I'rade Retail Trade "I'rans ortation and Warehousin Information Finance andInsurance Real Estate and Rental and Leasing Professional. Scientific, and Teclinical Services Mana ement of Com anies and Enterprises Administrative and Support and Waste Mana ement and Remediation Services Education Services I-lealth Care and Social Assistance Arts. Entertainment, and Recreation Accomniodation and 1=ood Services Other Services (except Public Administration) Public Administration Table 2 Exem lar List of Sector Metrics Industrv crowth rate Total capital ex enditures Inventories total - end of vear Average industry dividends Supplemental labor costs Inventories finished products - end of year New orders for nianufactured goods Puel costs Inventories work in rocess - end of ear Shipments Electric energry ased Inventories materials supplies fuels, etc -end of vear Un511ed orders Inventories by stage of fabrication Value of tnanufacturers inventories by stage of fabrication - begiiiiiiiig of year Inventories Nuniber of prodtictioli workers Inventories total - be ginninq ofvear Inventories-to-shipments ratio Payroll ofproduction workers Inventories finished products - beginning of vear Value of product shipntents Hours of production workers Inventories work in process - begiiiiiiiig of vear Statistics from departtnent of cotntnerce, Cost of purchased fuels and electric energy Inventories tnaterials supplies fuels, etc -industry associations, for industry groups beginningofyear and industries Geo gra hic area statistics Electric ener g uanti urchased Value of shi tnents - total Annual survev of manufacturers (ASIM) Electric ener g- cost Value of shi tnents - prodticts Emplovtnent Electric energy generated Value of shiptnents - total miscellaneous receipts AII etnployees payroll Electric enera sold or transferted total tniscellaneous receipts - Value of resales All etnployees hours Cost of purchased fuels total tniscellaneous receipts -contract recci ts All employees total compensation Capital expenditure for plant and equipment Other total miscellaneous receipts total All employees total fringe benefit costs Capital expenditure for plant and equipnient - Interplant transfers buildin gs and other stntcmres Total cost of tnaterials Capital ex enditure for plaiii and e ui tnent - Costs of materials - total machinery and e ui tnetit total Payroll Capital expenditure for plant and equipment - Costs of materials -materials, parts, autos, tntcks. etc for highway use containers, packaging, etc Value added by manufacture Capital expenditure for plant and equipment - Costs of materials - resales computers, peripheral data processine ui tnent Cost of materials consumed Capital expenditure for plant and equipment - Costs of materials - purchased fuels all other es enditures Value of shipments Value of manufacturers inventories by stage of Costs of materials - purchased electricity fabrication - cnd of year Costs of materials - contract work Industrv cost of ca ital Average industrv dividend 101861 As set forth herein, the universe may refer to a complete set of a group of financial objects, for example. Within the group, there may be sub-groups, tenned sectors. Each sector may include additional sub-portions, termed sub-sectors. This process may be reiterated for finer degrees of granularity as well.
101871 As one example, the universe may comprise all publicly traded stocks. A
sector within the universe may comprise all publicly traded stocks for the developed world except the United States. An exemplary ADBI using the foregoing sector is the FTSE O
RAFIOO Developed ex US Mid Small 1500 Index, available from PowerShares Global Exchange Traded Fund Trust of Houston, Texas. A brief, non-exhaustive list of exemplary sectors is provided in Table 3.
101881 An exemplary process for construction of the aforementioned FTSE O
RAFIO
Developed ex US Mid Small 1500 Index comprises the following. First, the securities universe of companies of the index may be calculated, based on any exemplary objective inetrics. The exemplary objective metrics may include, for example: (i) the percentage representation of each security using only sales figures; (ii) the percentage representation of each security using cash flow figures; (iii) the percentage representation of each security using book value; and/or (iv) the percentage representation of each security using dividends. (A security that has not paid a dividend in the past five years will have a percentage representation of zero.) 101891 Next, the securities may be ranked, for example in order based on the fundamental value. For example, the securities may be ordered in descending order of their fundamental value, and the fundamental value of each company may be divided, for example, by its free-float adjusted market capitalization. The largest small and medium capitalization securities may then be selected. The latter will be the FTSE RAFIO Developed ex US Mid Small 1500 Index constituents. The weights of the constituents in the underlying index inay be set proportional to their fundamental value, for exainple.
101901 Exemplary industry metrics that may be used in weighting financial objects may be found in Table 3.

Table 3.
Exemplary Industry Metrics F"rSE RAFI Utilities Sector Portfolio FTSE RAFI Basic N9aterials Sector {'ortfolio FTSE RAFI Consumer Goods Sector Portfolio F"rSE RAFI Consumer Services Sector Portfolio FTSE RAFI Eneray Sector Portfolio F"I'SE RAFI Financials Sector Ponfolio FTSE RAFIm Industrials Sector Portfolio FTSE RAFI Health Care Sector Portfolio FTSE RAFI Telecom & Technolo gv Sector Ponfolio E.remplary ADBI /ndex Computation Processes 101911 According to an exemplary embodiment, the ADBI index may be created by a selection subsystem and a weighting function generating subsysteln.
101921 According to an exemplary embodiment, the selection subsystem may be operative to: (i) for each entity, assign a percentage factor to each of a plurality of the at least one non-market capitalization objective measure of scale and/or size metric, each of the percentage factors corresponding to the importance of the at least one non-market capitalization objective measure of scale and/or size metric to the selection; (ii) for each entity, multiply each of the percentage factors with the corresponding non-market capitalization objective measure of scale and/or size metric thereof, to compute a selection relevance factor for the entity; and/or (iii) determine the selected group of entities by: (a) comparing the selection relevance factors for the entities; (b) ranking the entities based on the comparison; and/or (c) selecting a predetermined number of the entities having highest rankings to be the selected group of entities.
101931 According to an exelnplary embodiment, the weighting function generating subsystem may be operative to: (i) for each entity including the selected group of entities, assign a percentage factor to each of a plurality of the at least one non-market capitalization objective measure of scale and/or size metric, each percentage factor corresponding to the importance of the at least one non-market capitalization objective measure of scale and/or size metric to the weighting; (ii) for each entity including the selected group of entities, multiply each of the percentage factors with the corresponding non-market capitalization objective measure of scale and/or size metric thereof, the corresponding non-market capitalization objective measure of scale and/or size metric being a member of the plurality, to compute an entity function; and/or (iii) set the weighting function as a combination of the totality of the entity functions.

101941 According to an exemplary embodiment, the selection subsystem may be operative to: (i) for each entity, assigning a percentage factor to each of a plurality of the at least one objective metric, each percentage factor corresponding to the importance of the at least one objective metric to the selection; (ii) for each entity, multiplying each of the percentage factors with the corresponding objective metric thereof, to compute a selection relevance factor for the entity; and/or (iii) determining the selected group of entities by: (a) comparing the selection relevance factors for the entities; (b) ranking the entities based on the comparison; and/or (c) selecting a predetermined number of the entities having highest rankings to be the selected group of entities.
101951 According to an exemplary embodiment, the object weighting function generating subsystem may be operative to: (i) for each entity including the selected group of entities, assigning a percentage factor to each of a plurality of the at least one objective metric, each percentage factor corresponding to the importance of the at least one objective metric to the weighting; (ii) for each entity including the selected group of entities, multiplying each of the percentage factors with the corresponding objective metric thereof, the corresponding objective metric being a inember of the plurality, to compute an entity function; and/or (iii) setting the weighting function as a combination of the totality of the entity functions.

E.remplary Accountina Data Based Inde.ration Long-Short (ADBI-LS) 101961 Accounting data based indexation long-short (ADBI-LS) such as, e.g., but not Iimited to, RAFI KO-LS, is a long-short U.S. equity strategy that leverages ADBI such as RAFIO
innovation. The RAFIO U.S. 1000 portfolio is designed to outperform traditional capitalization-based indexes By going long in stocks that have greater weight in the RAFIO
U.S. 1000 portfolio relative to a traditional index, such as the Russell 1000 and short in the stocks that are underweight in the RAFIO U.S. 1000 relative to the Russell 1000, the RAFIOO-LS
strategy captures the RAFIO alpha process and enhances that alpha source.
101971 ADBI-LS such as, e.g., RAFIOO-LS according to an exemplary einbodiment, is designed to be roughly dollar and beta neutral, but not sector neutral. The sector bet can be significant if the ADBI strategy determines that a sector is substantially overvalued.
101981 In general the overlap between ADBI RAFIOO U.S. 1000 and a traditional capitalization based index, such as the Russell 1000 may be about 75%. This may give 25%
weights for the long portfolio and 25% weights for the short portfolio. The portfolio may be applied to 300% long and 300% short, which may magnify the RAFIOO alpha and the portfolio volatility. Leverage may be applied tactically, and can range from about 200%
long/short to about 400% long/short according to exemplary embodiments.
101991 ADBI-LS such as, e.g., RAFIOO-LS according to an exemplary embodiment may be designed to achieve an annual volatility of 15-25%. Volatility of the exemplary RAFIO-LS, since inception, has been about 15%.
102001 According to an exemplary embodiment, ADBI-LS, such as, e.g., RAFIO-LS
may use leverage in both its short and long positions. On average, $100 invested in RAFIOO-LS may result in a $300 notional long position and a $300 notional short position.

E.remp/ary Iniplementation of an Exemp/ary ADBI-LS's Lona and Short Positions 102011 According to an exemplary embodiment, one does not necessarily directly need to hold long or short positions in the underlying stocks, nor does it need to access a direct line of credit for the portfolio leverage. Instead, according to an exemplary embodiment, derivatives, such as a total return swaps may be used to implement the long and short positions. It may be possible to achieve minimal counterparty default risk exposure by entering into swaps with large Wall Street firms in an exemplary embodiment. Investors in an ADBI-LS may not be physically shorting any U.S. equities; rather, investors may merely hold OTC derivative contracts. This may provide both tax benefits and efficiency in investment logistics.
102021 ADBI-LP such as, e.g., RAFIO-LP, may be a full-market ADBI. ADBI-LS
such as, e.g., RAFIO-LS, may be a fund that uses the differences between company weights in ADBI
such as, e.g., RAFIO and in a capitalization-weighted index to establish long and short positions according to an exemplary embodiinent.
102031 ADBI-LS may be designed to be dollar neutral and equity beta neutral in an exemplary embodiment. Therefore, one may expect ADBI-LS returns to be largely uncorrelated with the equity market return in an exemplary embodiment. However, ADBI may not be market neutral in the traditional sense as it is not industry sector neutral in an exemplary embodiment.
102041 ADBI-LS does not pair positions, and thus is different from traditional equity long-short strategies whereby, e.g., but not limited to, a short General Motors (GM) position is paired with a long Ford position. Instead, ADBI-LS may acquire both long and short positions based on the relative difference between the ADB Index such as, e.g., FUNDAMENTAL
INDEXO
weights and those of a cap-weighted index, such as, e.g., but not limited to the Russell 1000.

102051 An exemplary embodiment of ADBI-LS may rebalance periodically and/or aperiodically. For example, on average, the ADBI-LS, such as, e.g., RAFIOO-LS
portfolio may hold its long-short bets for about one year. The cash flow from ne%v capital contributed to the strategy may be used to rebalance the portfolio to create new or alter existing long-short bets according to an exemplary embodiment.
102061 In an exemplary embodiment, the present invention may be a method of constructing a portfolio of financial objects, coniprising: purchasing a portfolio of a plurality of mimicking financial objects to obtain and/or create a mimicking or resampled portfolio, wherein performance of the portfolio of mimicking financial objects substantially mirrors the performance of the accounting data based index based portfolio without substantially replicating the accounting data based index based portfolio. The niethod may further obtain and/or use a risk model for the portfolio where the risk model mirrors a risk model of the accounting data based index. The risk niodel may be substantially similar to the Fama-French factors, wherein the Fama-French factors may comprise at least one of size effect (e.g., where small cap beats large cap), value effect (e.g., where high B/P beats low B/P), and/or momentum effect (e.g.
where strong momentum beats weak momentum in very long run, e.g. 10 or more years). The performance of the portfolio of mimicking financial objects may substantially inirror the performance of the accounting data based index based portfolio without substantially replicating financial objects and/or weightings in the accounting data based index based portfolio.
102071 In another exemplary embodiment, the present invention inay include purchasing a plurality of financial objects according to weightings substantially similar to the weightings of an accounting data based index (ADBI), where performance of the financial objects substantially mirrors the performance of the ADBI without using substantially the same financial objects in the ADBI.

Exemplary Performance of Portfolios of Financial Objects for Fi.red Income Financial Objects 102081 In an exemplary embodiment, the performance of portfolios of financial objects for fixed income financial objects may be compared to benchmarks, such as, for example, capitalization-weighted indexes.
102091 Fixed income financial objects may include, for example, investment-grade bonds, high-yield bonds, and emerging inarket bonds. A portfolio of financial objects for fixed income financial objects inay be, for example, a portfolio of investnient-grade bonds, a portfolio of high-yield bonds, or a portfolio of emerging niarket bonds.
102101 The performance of a portfolio of financial objects for fixed income financial objects may be compared with capitalization-weighted indexes for the same type of financial objects.
The comparison may show whether the methods of selecting financial objects for inclusion in a portfolio of financial objects, as described in the sections above, may result in better performance than that of a capitalization-weighted index. The comparison may also show how inuch of any outperformance shown by the portfolio of financial objects may be attributable to increased risk as opposed to the method by which the securities are selected.
Outperformance of capitalization-weighted indexes by portfolios of financial objects, adjusted for risk, may also indicates the strength of the Noisy Market Hypothesis.

lnvestnrent Grade Corporate Bonds 102111 An exemplary portfolio of financial objects for fixed income financial objects may include, for example, investment-grade corporate bonds. The exemplary portfolio may be an investment-grade corporate bond portfolio. The investment-grade corporate bonds in an exemplary investment-grade corporate bond portfolio may be selected in a manner similar to the method described herein for selecting high-yield bonds. Data elements, measures, and/or metrics used to select investment-grade corporate bonds for inclusion in the exemplary investment-grade corporate bond portfolio may be related to the corporation responsible for issuing the investment-grade corporate bonds, and may include, e.g., but not limited to, total cash flow, free cash flow, total dividends, book value of assets, sales, collateral, and total cash on hand, among other accounting based metrics. The data elements, measures, and/or metrics may be obtained from, for example, the WorldscopeT"^ database in an exemplary embodiment. A
lagged, e.g., five-year average may be computed for all data elements, measures and/or metrics, except book value of assets, for which a most recently reported number may be used. Total dividends may include, e.g., but not be limited to, the aggregate dividends paid, both common and preferred. Collateral may be defined, e.g., but not be limited to, as property, plant, and equipment plus cash and cash equivalents. The book value of assets inay be used to reflect the claims that bondholders have on the balance sheet of a corporation.
102121 In one exemplary embodiment, four inetrics may used to rank corporations that issue investment-grade corporate bonds, and a corporation may be given a score according to the corporation's relative weight on each metric. For example, two composite measures may be cotnputed for a corporation, one including assets, dividends, cash flow, and collateral, and a second that may replace collateral with sales. The overall fundamental weight may be assigned by, e.g., but not liinited to, equally weighting all four of the metrics (or, when a corporation does not pay a dividend, by equally weighting the remaining three metrics).
Alternatively weighted combinations of the metrics i;nay be used as well.
102131 Corporate bond constituent data for investment-grade corporate bonds for the years 1997 through 2007 may be obtained from, e.g., but not be Iimited to, the MERRILL LYNCHOO
U.S. Corporate Master Index (for investment grade bonds). The U.S. Corporate Master Index includes all investment-grade corporate bonds rated AAA to BBB-.
102141 Individual investment-grade corporate bond data may be matched with the corporate data used to weight the corporations. It inay not be possible to match many of the bonds in the MERRILL LYNCHOO indexes with their corporations, as some investment-grade corporate bonds are not issued by listed corporations for which accounting data can be accessed.
Investment-grade corporate bonds issued by privately or employee-owned companies and cotnpanies that are based in foreign countries or traded on the OTC exchanges, for example, may be difficult to match. The exemplary investment-grade corporate bond portfolio may be compared to, e.g., a published benchmark for investment-grade corporate bonds, a capitalization-weighted index of investment-grade corporate bonds constructed from the universe of successfully matched investment-grade corporate bond issues, and the like. This may ensure that any results of the comparison are due to the tnethod used to select the investment-grade corporate bonds and not due to sample bias.
102151 The fundamental weight from a corporation may not be applied directly to each of the investment-grade corporate bonds issued by the corporation. Instead, when a corporation issues N bonds, the fundamental weight may be divided amongst the investment-grade corporate bonds according to the ratio of each investment-grade corporate bond's face value to the sum of the face value of debt issued by the corporation. The weights may then be rescaled to correct for the fact that not all corporations with a fundamental weight have debt issues on their books. The investment-grade corporate bond portfolio may comprise the resulting list of investment-grade corporate bonds and weights.
Table 4 Panel A: High Yield Corporate Bonds I Std I nf.
Return Dev Sharpe Credit Rating Duration Excess Ret t stat Track Error Ratio Assets 8.14 5.12 0.87 BB2/BB3 4.58 2.04 5.36 1.15 1.77 Dividends 7.68 6.90 0.58 BB3 4.96 1.58 3.21 1.91 0.83 Cash Flow 7.89 5.13 0.82 BB3 4.39 1.79 4.79 1.20 1.49 Free Cash Flow 8.18 4.96 0.91 BB2/BB3 4.41 2.08 5.63 1.01 2.06 Collateral 7.03 5.92 0.57 BB3 4.54 0.93 2.48 1.50 0.62 Cash 7.98 4.75 0.91 BB3 4.16 1.88 5.39 1.43 1.31 Sales 8.15 4.98 0.90 BB3 4.30 2.05 5.54 1.04 1.97 Combined A 7.67 5.38 0.74 BB2/BB3 4.52 1.57 4.10 1.35 1.16 Combined B 7.84 5.18 0.81 BB2/BB3 4.46 1.74 4.64 1.25 1.39 Benchmark 7.10 6.53 0.53 663/B1 4.53 1.00 1.76 0.41 2.44 Published Index 6.10 6.54 Panel B: Investment Grade Corporate Bonds Credit Excess t Track Inf.
Return Std Dev Sharpe Rating Duration Ret stat Error Ratio Assets 6.63 4.45 0.67 AA3/A1 5.74 0.25 0.65 0.27 0.93 Dividends 6.78 4.68 0.67 AA2/AA3 6.21 0.40 0.98 0.31 1.29 Cash Flow 6.69 4.57 0.67 AA3 6.01 0.31 0.78 0.29 1.07 Free Cash Flow 6.63 4.48 0.66 AA3/A1 5.90 0.25 0.64 0.25 1.00 Collateral 6.66 4.51 0.67 AA3/A1 5.95 0.28 0.71 0.25 1.12 Cash 6.92 4.80 0.68 AA3/A1 6.43 0.54 1.29 0.31 1.74 Sales 6.70 4.55 0.67 AA3/A1 6.01 0.32 0.81 0.28 1.14 Combined A 6.71 4.57 0.67 AA3 6.02 0.33 0.83 0.28 1.18 Combined B 6.71 4.57 0.67 AA3 6.02 0.33 0.83 0.28 1.18 Benchmark 6.40 4.50 0.61 Al 5.80 0.02 0.05 0.19 0.11 Published Index 6.38 4.43 Panel C: Emerging Market Bonds (top 50, sorted by face value Std Credit Excess Track Return Dev Sharpe Rating Duration Ret t stat Error Inf. Ratio Population 14.45 15.72 0.68 BB1/BB2 5.94 3.13 2.29 1.73 1.81 Area 17.34 22.96 0.59 BB2/BB3 5.37 6.02 3.01 3.87 1.56 GDP 14.22 15.32 0.69 BB2 5.98 2.90 2.17 1.40 2.07 Reserves 12.56 12.46 0.71 BB1/BB2 6.08 1.24 1.14 0.98 1.27 Face Value 14.87 17.39 0.64 B82/13133 5.94 3.55 2.35 1.50 2.37 Combined A 15.28 17.57 0.66 BB2 5.75 3.96 2.59 2.13 1.86 Combined B 15.25 17.84 0.64 BB2/BB3 5.84 3.93 2.53 1.88 2.09 Benchmark 11.75 14.81 0.57 BB2/BB3 6.13 0.43 0.33 0.58 0.74 Published Index 11.32 13.58 Table 5 Panel A: High Yield Corporate Bonds Std Credit t Track Inf.
Return Dev Sharpe Rating Duration Excess Ret stat Error Ratio Assets 7.23 6.53 0.55 BB3/B1 4.68 1.13 1.99 0.86 1.31 Dividends 6.68 6.64 0.45 BB3/B1 4.97 0.58 1.00 1.63 0.36 Cash Flow 7.87 5.04 0.83 BB3 4.37 1.77 4.03 1.19 1.49 Free Cash Flow 7.72 4.93 0.82 BB3 4.35 1.62 3.78 0.96 1.69 Collateral 6.58 6.71 0.43 BB3/B1 4.78 0.48 0.82 0.93 0.52 Cash 7.54 7.07 0.55 BB3/B1 4.58 1.44 2.34 0.85 1.69 Sales 7.25 5.84 0.61 BB3/B1 4.47 1.15 2.26 0.91 1.26 Combined A 7.67 5.38 0.74 BB2/BB3 4.52 1.57 3.35 1.35 1.16 Combined B 7.85 5.10 0.82 BB2/BB3 4.44 1.75 3.94 1.25 1.40 Benchmark 7.28 6.27 0.58 BB3/B1 4.53 1.18 2.16 0.38 3.11 Published Index 6.10 6.54 Panel B: Investment Grade Corporate Bonds Credit Excess Track Inf.
Return Std Dev Shar e Rating Duration Ret t stat Error Ratio Assets 6.57 4.28 0.68 Al 5.58 0.19 0.51 0.20 0.95 Dividends 6.77 4.63 0.67 AA3/A1 6.15 0.39 0.97 0.22 1.77 Cash Flow 6.66 4.49 0.67 AA3/A1 5.88 0.28 0.72 0.27 1.04 Free Cash Flow 6.65 4.39 0.68 Al 5.80 027 0.71 0.23 1.17 Collateral 6.65 4.49 0.67 Al 6.01 0.27 0.69 0.14 1.93 Cash 6.77 4.73 0.66 Al 6.44 0.39 0.95 0.21 1.86 Sales 6.64 4.57 0.65 Al 6.13 0.26 0.65 0.20 1.30 Combined A 6.69 4.49 0.68 AA3/A1 5.91 0.31 0.79 0.25 1.24 Combined B 6.70 4.51 0.68 AA3/A1 5.93 0.32 0.82 0.25 1.28 Benchmark 6.51 4.50 0.64 A1/A2 5.94 0.13 0.33 0.12 1.08 Published Index 6.38 4.43 Panel C: Emer in Market Bonds Credit Excess Track Inf.
Return Std Dev Shar e Rating Duration Ret t stat Error Ratio Population 10.80 7.44 0.95 BB1 4.88 -0.52 -0.80 2.46 -0.21 Area 14.16 16.16 0.65 BB1/BB2 4.78 2.84 2.02 2.36 1.20 GDP 11.18 8.85 0.85 BB1 5.08 -0.14 -0.18 2.02 -0.07 Reserves 10.44 7.96 0.85 BB1 5.03 -0.88 -1.27 2.19 -0.40 Face Value 13.76 15.56 0.65 BB2/BB3 5.46 2.44 1.80 1.12 2.18 Combined A 11.76 10.13 0.80 BB1 4.93 0.44 0.50 1.88 0.23 Combined B 12.95 12.93 0.72 BB1/BB2 5.18 1.63 1.45 1.34 1.22 Benchmark 11.64 13.65 0.58 BB2/BB3 5.61 0.32 0.27 0.31 1.03 Published Index 11.32 13.58 102161 As seen in Tables 4 and 5 an exemplary investtnent-grade corporate bond portfolio tnay outperform the capitalization-weighted MERRILL LYNCHOO U.S. Corporate Master Index by 33 basis points per year, and outperforms the benchmark by 32 basis points per year.
102171 With reference to Table 4, performance of fixed income fundamental indexes vs.
benchmarks, i.e., top 500 names (top 50 for EMD) is provided, including top 500 names selected by fundamental weight for the High Yield and Investment Grade indexes, and top 50 names selected by face value for the emerging markets index. For the corporate indexes, combined A
includes assets, dividends, cash flow, and collateral, and combined B includes assets, dividends, cash flow, and sales. For the emerging markets, combined A includes population, area, GDP, and reserves, and combined B includes population, area, GDP, and face value.
As used therein, "Published Index" is the index return for the relevant MERRILL LYNCHO
benchmark return provided by Bloomberg, "Benchmark" is the cap-weighted benchmark constructed from our particular matched subsample, and excess returns and tracking error are computed against the published index.
102181 With reference to Table 5, the performance of fixed income fundamental indexes vs.
benchmarks, i.e., top 500 names (top 50 for EMD) is provided, including top 500 names selected by fundamental weight for the high yield and investment grade indexes, top 50 names selected by face value for the emerging markets index. For the corporate indexes, combined A includes assets, dividends, cash flow, and collateral, and combined B includes assets, dividends, cash flow, and sales. For the emerging -narkets, combined A includes population, area, GDP, and reserves, and combined B includes population, area, GDP, and face value.
"Published Index" is the index return for the relevant MERRILL LYNCHO benchmark return provided by Bloomberg; and "Benchmark" is the cap-weighted benchmark constructed from our particular matched subsample excess returns and tracking error are computed against the published index.
102191 Table 6 illustrates dynamic Brinson performance attribution. The table shows risk attribution due to static and dynamic loadings on duration and credit risk factors. As seen in Table 6, for the investment-grade corporate bond portfolio, both duration and credit risk may be negligibly different from the capitalization-weighted index. However, the investment-grade corporate bond portfolio may deliver 22 basis points of outperformance, which may be due to superior security selection over the capitalization-weighted index.

'rabic 6 Returns RAFI Benchmark Difference High Yield 7.84% 7.10% 0.74%
Investment Grade 6.71% 6.38% 0.33%
Emer in Markets 15.29% 11.75% 3.53%
Duration Total Static Dynamic High Yield -0.29% 0.10% -0.38%
Investment Grade 0.02% -0.03% 0.05%
Emer in Markets 1.15% 0.33% 0.82%
Credit Total Static Dynamic High Yield 0.08% -0.02% 0.10%
Investment Grade 0.09% 0.05% 0.04%
Emer in Markets 0.82% -0.71% 1.52%
Security Selection High Yield 0.94%

Investment Grade 0.22%
Emer in Markets 1.56%
High Yield Bonrls 102201 Another exemplary portfolio of financial objects for fixed income financial objects may include, for example, high-yield bonds. The exemplary portfolio may be a high-yield bond portfolio. The high-yield bonds in an exemplary high-yield bond portfolio may be selected in a inanner similar to the method described herein for selecting high-yield bonds.
Data elements, measures, and/or metrics used to select high-yield bonds for inclusion in the exemplary high-yield bond portfolio may be related to the corporation responsible for issuing the high-yield bonds, and may include, e.g., but not be limited to, total cash flow, free cash flow, total dividends, book value of assets, sales, collateral, and total cash on hand.
The data elements, measures, and/or metrics may be obtained froni, for example, the Worldscope database. In an exemplary embodiment, a lagged, e.g., five-year average, may be computed for all data elements, measures and/or metrics, except book value of assets, for which most recently reported number may be used. Total dividends may include the aggregate dividends paid, both coinmon and preferred. Collateral may be defined, e.g., as property, plant, and equipment plus cash and cash equivalents. The book value of assets may be used to reflect the claims that bondholders have on the balance sheet of a corporation.
102211 Corporate bond constituent data for high-yield bonds for the years 1997 through 2007 may be obtained from, e.g., the MERRILL LYNCHO U.S. High Yield Master II
Index, BB and B rated (for the high yield universe) and the U.S. Master II Index includes all corporate bonds rated BB+ to B-.
102221 Individual high-yield bond data may be matched with the corporate data used to weight the corporations, as described herein for investinent-grade corporate bonds. Again, it may not be possible to match many of the high-yield bonds in the MERRILL
LYNCHOO indexes with their corporations, as some high-yield bonds are not issued by listed corporations for which accounting data can be accessed. High-yield bonds issued by privately or employee-owned companies and companies that are based in foreign countries or traded on the OTC exchanges, for example, may be difficult to match. For example, GMAC is a large issuer of high-yield bonds. However, the automobile-financing coinpany is 49% owned by General Motors and 51 %
owned by private equity. Hence, direct corporate financials with which to measure high-yield bonds may not be available. This matching problem may be more severe for the high-yield bonds than for investment-grade corporate bonds.
102231 The exemplary high-yield bond portfolio may be compared to both a published benchmark for high-yield bonds as well as a capitalization-weighted index of high-yield bonds constructed from the universe of successfully matched high-yield bond issues.
This may ensure that any results of the comparison are due to the method used to select the high-yield bonds and not due to sample bias.
102241 The fundamental weight from a corporation may not be applied directly to each of the high-yield bonds issued by the corporation. Instead, the fundamental weight may be applied to high-yield bonds in the same manner as described herein for the exemplary investment-grade corporate bond portfolio.
102251 As seen in Tables 4 and 5, the exemplary high-yield bond portfolio may outperform the capitalization-weighted MERRILL LYNCHOO U.S. High Yield Master 11 (BB-B) Index by 174 basis points per year, and the benchmark by 175 basis points per year.
From Table 6, comparing between the exemplary high-yield bond portfolio and the capitalization-weighted portfolio may show a greater outperformance than the exeinplary investment-grade corporate bond portfolio. This may be due to more noise in high-yield bond market, while the investment-grade corporate bond marketplace may have less volatility and pricing error.
For the exemplary high-yield bond portfolio, a lower exposure to duration risk may hurt returns.
The dynamic attribution on duration may hurt performance by 38 basis points. The credit exposure may increase returns by 8 basis points. Security selection may be seen to result in 94 basis points of outperformance by the exemplary high-yield bonds portfolio as compared to the capitalization-weighted portfolio of high-yield bonds.
102261 For the investment grade corporate bonds, both duration and credit risk may be negligibly different from the benchmark. However, superior security selection may deliver, for exainple, 22 basis points of outperformance. And for emerging markets, the portfolio may illustrate a significant allocation to the risk factors. The fundamental portfolio may owe 115 and 82 basis points of its outperformance to the duration and credit risk factors, respectively. In an embodiment, the majority of this allocation may arise from the dynamic timing element, and this may still leave 156 basis points of outperforinance to security selection. In an embodiment, the outperformance of the fundamental indexes in the fixed income space is not explained away by exposure to risk factors, but rather comes from superior security selection and, to the extent that risk may play a role, may do so in a generally dynamic manner.

Einerbing Market Bonds 102271 Another exemplary portfolio of financial objects for fixed income financial objects inay include, for example, emerging market bonds. The exemplary portfolio may be an einerging inarket bond portfolio. A similar procedure as described herein, but with different factors, may be utilized for the construction of the exemplary emerging market bond portfolio.
Data elements, measures, and/or metrics used to select emerging market bonds may be: total population, land area (which may be a proxy for resources), total gross domestic product, and financial reserves. All data elements, measures, and/or metrics may be computed as smoothed five-year averages. Information on these data elements, measure and/or metrics may be gathered, for example, from the CIA World Factbook from 1993 through 2007. A
second exemplary emerging market bond portfolio may be constructed by substituting face value of debt for the reserves metric. Each country that issues an emerging market bond may be given a weight on each data eleinent, measure and/or metric proportional to its representation, and, e.g., a five-year average may be computed for these weights. A country's aggregate weight may be assigned to, e.g., but not be Iimited to, the equally weighted average of the country's score on each of the four data elements, measures and/or metrics described herein.
102281 Constituent emerging market bond issues may be gathered from the MERRILL
LYNCHOO Emerging Markets Index, USD (US dollar)-denominated Foreign Sovereign Debt rated BBB+ and lower. As of 2007, this may include 194 separate issues from 33 countries. To avoid the overrepresentation problem created by one country with multiple debt issues, the country weight may be split amongst each of the country's issues according to face value of the debt, in an analogous manner to the procedure used with investment-grade corporate bonds; the result may be the final weighting scheme.
102291 An exemplary emerging market bond portfolio may be compared to a capitalization-weighted emerging market bond index. As seen in Tables 4 and 5, the exemplary emerging markets bond portfolio may outperforin the MERRILL LYNCHOO Emerging Markets Debt Index by 396 basis points per year, and the benchmark by 163 basis points per year. As seen in Table 6, the exemplary emerging markets bond portfolio shows a significant allocation to the risk factors. The exemplary emerging markets bond portfolio may owe 1 15 and 82 basis points of its outperformance to the duration and credit risk factors, respectively.
However, the majority of this allocation inay come from the dynamic timing element. This still leaves 156 basis points of outperformance which may be the product of security selection.

Exenrplary Emhodimenl of High Yield Debt /nslrumenl Inrle_r 102301 In one or more exemplary embodiments, the index of financial objects may include an index of debt instruments. In one exemplary embodiment, the index of debt instruments may include a bond index, and an exemplary bond index may include a high yield bond index.
102311 An exemplary debt instrument may include any debt instruments issued by any type of entity or organization. Exemplary issuing organizations may include, for example, a company, a state, a sovereign, a municipality, and/or a country, to name a few. A bond -nay entitle a holder of the bond to receive, for example, interest payments on the purchase price of the bond for as long as the holder holds the bond. Further, a bond may have a maturity date, at which the issuer of the bond may be required to repay the purchase price of the bond to the current holder of the bond. A bond may be bought, sold, and/or swapped as any other security or debt instrument.
102321 High-yield bonds may include debt instruments, such as, for example, bonds, rated below investment grade by bond rating organizations, such as, for example, Moody's or Standard and Poor's. High-yield bonds may consequently carry a higher interest rate than investment grade bonds. For example, according to one exemplary embodiment, a bond rated at BBB or below may be considered to be a high-yield bond, and may carry a higher interest rate than a bond rated above BBB. Debt instruments receiving below investinent grade ratings may be, for example, debt instruments issued by companies with poor credit ratings due to, for example, negative cash flow, excessive debt, and/or poor market conditions, etc., as they pertain to the company.
102331 In an exemplary embodiment, a construction technique for creating a bond index may include selecting high yield bonds from a universe of bonds using a selective metric related to the issuer of the bond, and weighting the selected high yield bond constituents according to at least one objective metric related to the issuer. The constituents may be weighted in relative proportion to, the objective metric, which may include, e.g., but not be limited to, an accounting data inetric, such as, e.g., but not limited to, sales and/or dividends associated with the issuer of the bonds, i.e., accounting data associated with the debt issuer. In one exemplary embodiment, a weighted combination such as, e.g., an equally weighted combination of sales, book value, any dividends, cash flow (how much cash is going in and out, ignoring capital expenditures), and/or collateral mav used to weight. Other inetrics such as, e.g., EBITDA, may also be used in an exemplary embodiment. A composite measure may also be created as a combination of a group of such factors.
102341 According to another exemplary embodiment, other accounting data metrics -nay be used, however in no case will a metric be used which is materially influenced by price, such as, e.g., but not limited to, market capitalization. Further, weighting is not to be based on the product of the total number of bonds and face value. In an exeinplary embodiment, the universe of bonds may be partially, or all, below investment grade bonds, such as, e.g., but not limited to, BBB or less. An exemplary investment grade bond may include bonds contained in or associated with the MERRILL LYNCHO Master High Yield Bond Index. In one exemplary embodiment, high yield bonds may include bonds with at most a BBB bond rating. In another exemplary embodiment, high yield bonds may include, e.g., but are not limited to, bonds with a BB or less rating, etc.
102351 In an exemplary embodiment, the index weight for each issuer may be based on, e.g., but not limited to, a composite company accounting data measure created from a weighting, such as, e.g., equal weighting of one or a plurality of data metrics. In one such exemplary embodiment, the factor niay be any one or more of: (i) normalized, (ii) for a 5-year span, (iii) an average value, and/or (iv) non-zero. Exemplary factors may include, without limitation, factors based at least partially on any one or more of: sales, book value, cash-flow, any dividends, and/or collateral, etc.
102361 In an exemplary embodiment, for each debt issue associated with each issuer, the issuer weight may be assigned to each corresponding debt issue and, according to an exemplary embodiment, may be pro-rated for the face value of the debt issue relative to the firm's total debt outstanding. For example, in the entire MERRILL LYNCHO bond universe, bonds that cannot be matched to underlying company accounting data may be omitted from the RAFIO
High Yield Index.
102371 Table 7 depicts a summary correlation matrix for an exemplary embodiment of an high yield bond index. In this einbodiment, gains may be somewhat concentrated during times when high yield-bonds may have been weak, but, the statistical significance in so short a span was remarkable for these embodiments.

Table 7.

Correlation Matrix (1997 - June 2006) Correlation Matrix Index Ann. TR Std Dev HOAO G502 Sales Div Book CF
ML HY 6.23% 7.33% 1.00 ML Gov 1-10 5.17% 2.96% -0.11 1.00 Sales 8.03"/u 7.05% 0.90 -0.11 1.00 Dividend 9.22% 6.15% 0.80 0.00 0.89 1.00 Book 6.97% 8.74% 0.95 -0.14 0.95 0'82 1.00, Cash Flow 7.54% 7.05% 0.94 -0.08 0.95 0.87 0.97 1.00 Collateral 7.21% 8.47% 0.94 -0.13 0.95 0:81 0.98, 0.96 Composite 7.68'/0 7.57% 0.93 -0.12 0.98 0.87 0.98 0.98 Par 6.18% 9.07% 0.99 P-0.15 0 90 079, 0.96 ` 0.93 E ual 7.09% 7.08% 0.96 -0.14 0.93 0.82 0.93 0.92 E ui Market' 8.99% 16230/c 0.54 -0.26 0.42 0.31 -0.49x ='. 0.46 Market - monthly cap-weighted returns from NYSE, AMEX, and NASDAQ (not excess return) 102381 Table 8 depicts ezemplary regression results for an exetnplary embodinient of a high yield bond index.
Table 8.
Regression Results (1997- June 2006 ML Gov LHS a (bp) 1-10 r ML HY` Mkt SMB HML UMD R 2 RAFI HY Sales 26 95 -0.08 0 87 0 84 28.67 -013 0.91 -0.04 0.84 124 -1.41 21.58 -2.12 24.64 -011 0.89 002 002 005 000 0.85 2.70 -118 19.78 -0.70 0.73 1.75 0.00 26.18 -0.07 0.87 -0.02 0 03 0.05 -0.03 0.85 2.89 -0.74 18.92 -0.84 1.21 1 72 -1.87 RAFI HY Dividend 21.38 0.01 0.87 0.84 2.70 0.07 23.92 22.59 -0.04 0.90 -0.03 0.84 2.87 -0.44 22.60 -1.76 21 11 -0.05 0.91 -0.01 -0.04 0 03 0.00 0:86 2.77 -0.65 21.31 -0:32 -2.28 142 0.00 20.44 -0.07 0.92 0.00 -0.05 0.03 0.01 0.86 2.67 -0.84 20-83 -0.25 -2.43 1 41 0 87 RAFI HY Book 8.14 -0.17 1.13 0.93 1.10 -2.30 37.36 8.87 -0.19 1.15 -0.02 0.93 1.19 -2.50 32.42 -1.09 11.49 -0.22 1.18 -0.03 -0.03 -0.02 0.00 0.93 1.50 -2.76 30.87 -1.41 -1.68 -1.04 0.00 12.06 -0.20 1.17 -0.03 -0.03 -0.02 -0.01 0.93 1.56 -2.50 29.63 -1.46 -1.39 -1.05 -0.81 RAFI HY Cash flow 7.71 -0.01 1.00 0.95 1.53 -0.22 45.41 8.09 -0.02 1.01 -0.01 0.95 1.60 -0.46 40.11 -0.94 9.87 -0.04 1.03 -0.02 -0.02 -0.02 0.00 0.95 1.89 -0.74 36.97 -1:43 -1.52 ` -1.23 0.00 10.20 -0.03 1.03 -0.02 -0.02 -0.02 -0.01 0.95 1.94 -0.57 35.41 -1.46 -1.27 -1.22 -0.64 RAFI HY Collateral 10,85 -0.14 1.08 0:91 1.39 -1.73 34.19 12.13 -0.17 1.11 -0.03 0.92 1.57 -2.15 30.45 -1.8 13.20 0.19 1 13 0 03 -0 02 -0.01 0:00 0.92 1.64 -2.26 28.71 1 56 -1.05 -0.29 0:00 13.41 -0.18 1.12 -0.03 -0.02 -0.01 0 0.92 1.65 -2.13 27.58 -1.57 -0.93 -0.29 -0.28 RAFI HY Composite 8.67 -0.11 1 07 0 94 1 51 -1 95 42.55 9.22 -0.13 1.09 -0.01 0.94 1 60 -2.20 38.04 -1.20 11.72 -0.15 1.11 0 03 -0 03 -0:03 0.00 '0.95 2.00 -2.55 35.73 1:79 -1.98 -1.53 0.00 12.03 -0.15 1.11 -0.03 -0.03 -0.03 0 0.95 2.03 -2.35 34.12 -1.81 -1.74 -1.52 -0.51 RAFI HY Par weighted -7.05 -0.11 1.22 0.98 -1,83 -2.82 77.06 0 -6.55 -0.13 1.24 -0.01 0.98 -1.71 -3.17 66.59 -1.68 -6.94 -0.13 1.23 -0.01 0.00 0.00 0.00 0.98 -1.74 -3.06 ~.61.93 -112- 0.11 0.40 ' .:0.00 -6.37 -0.11 1.23 -0.01 0.00 0.00 -0.01 0.98 -1.59 -2.68 59.87 -1.22 0.50 0.37 -1.46 RAFI HY Equal weighted 14:43 -0.08 0.93 0.93 2.45 -1.35 38.27 , 0 15.33 -0.11 0.96 -0.03 0.93 2.63 -1.81 33.86 -1.99 10,77- -0.08 0:92 -0.01 0.05 0.04 . 0.00 .0:94 1.87 -1.29 ~ ,32.12 -0.34 3.47 2.61, 0.00 11.77 -0.05 0.91 -0.01 0.05 0.04 -0.02 0.94 2.06 -0.87 30.94 -0.47 3.85 2.59 -1.78 ML 1-10 r Government bond index ML HY' - Modified Merrill Lynch High Yield Master II Index (only includes bonds considered in LHS) 102391 In an exemplary embodiment, one aspect of index construction may include data acquisition, i.e., for example, collecting, compiling, normalizing, and/or associating data regarding a debt issuer and a given debt instruinent. Here, according to an exemplary embodiment, a comprehensive database may be built, i.e. constructed, of high-yield bonds and accounting data metrics related to the companies issuing the debt instruments.
This database may be linked to an existing database of related fundamental inetrics, such as accounting data that may include accounting data indicative of relative company size, other than -narket capitalization and price, with all the normal complications of ticker and Committee on Uniform Security Identification Procedures (CUSIP) differences.
102401 In exemplary e-nbodiments, the high yield bond universe may include all bonds, and/or all issues within a particular bond space. An exemplary bond space according to one exemplary embodiment may include the Merrill High Yield Bond space. Then, a selection of bonds having ratings below a predefined threshold may be selected. For example, bonds rated BBB or less by a bonds rating organization may be selected. Then, according to one exemplary embodiment, a further selection may be inade using at least one accounting data metric associated with the issuer company, wherein the metric is not materially influenced by price. In an exemplary embodiment, the full below-investment-grade universe may be used, subject to the investability constraints imposed by a company, such as, for example, but not limited to, MERRILL LYNCHOO . In an exemplary embodiment, such constraints and/or others may be lifted, and further improved results inay be gained. In one such exemplary embodiment, the liquidity thereof may be degraded, for example.
102411 Table 9 depicts a correlation matrix for an exemplary embodiinent of a high yield bond index. Table 9 illustrates statistical significance witnessed by the various exemplary weighting metrics. The following parameters are included: (i) Mean refers to a mean monthly return; (ii) Std Dev refers to a standard deviation from the mean; (iii) HOAO
refers to MERRILL
LYNCHO High Yield Master 11 Index; (iv) G502 refers to MERRILL LYNCHO U.S.
Treasuries I -lOYR; (v) Sales, Dividend, Book (value), Cash Flow refer to exemplary objective metrics of scale and/or size in relation to the entity; (vi) Collateral refers to assets used to pay debt holders, e.g., for secured debt instruments; (vii) Coinposite refers to a composite of two or more other metrics, which in the particular case, refers to Sales, Dividend, Book, Cash Flow and Collateral; (viii) Par refers to Face Value of the security; (ix) Equal refers to an equal weighting of all the qualified securities in the universe; and (x) Market refers to a proxy for the market, where data may be used as a benchmark capitalization weighted universe provided by the Center for Research in Securities (CRS), available froln the University of Chicago and Standard &
Poor's.

Table 9.
Correlation Matrix 1997 - June 2006) Correlation Matrix Index Mean Std Dev HOAO G502 Sales Div Book CF Colltrl C sit Par E ual Mkt HOAO 0.52% 2.12% 1.00 -0.11 0.90 0.80 0.95 0.94 0.94 0_93; 0.99 0.96 :0.54 G502 0.43% 0.86% -0.11 1.00 -0.11 0.00 -0.14 0.08 -0.13 -0.12 0.15 -0.14 0.26 Sales 0.67% 2.03% 0.90 -0.11 1.00 0:89 0.95 0.95 0.95 0.98 0.90 0.93 0.42 Dividend 0.77% 1.77% 0.80 0.00 0.89 1.00 0.82 0.87 0.81 0.87 0.79 0.82 0.31 Book 0.58% 2.52%, 0.95 -0.14 0.95 0.82 1.00 0.97 0.98 0:98 0.96 0.93 0.49 Cash Flow 0.63% 2.03 % 0 94 -0.08 0 95 0.87 0.97 1 00 0.96 0.98 0.93 0.92 0.46 Collateral 0.60% 2 44% 0.94 -0.13 0.95 0.81 0 98 0 96 1.00 0.95 0 93 0',u?
Com osite 0.64% 2.19% 0_93 -0.12 0 98 0.87 0.98 0 98 0.98 1.00 0 93 0.93 045 Par 0.51% 2 62% 0.99 -0:15 0.90 0 79 0.96 0.93 0.95 0.83 1.00 0.97 0.52 Equal 0.590/ 2.04 % 0.96 -0.14 0.93 0.82 0.93 0 92 0.93 0.93 0 97 1.00 0.48 Market 0.75% 4.69% 0.54 0.42 0.31 0.49 0 46 0.46 0.45 0.52 0 48 1.00 * Market - monthly cap-weighted returns from NYSE, AMEX, and NASDAQ (not excess return) 102421 In an exemplary embodiment, the index may be reconstituted/rebalanced on a periodic and/or aperiodic basis such as, e.g., but not Iimited to, every month as bonds mature, and tnay fall out of the index, and as new issues are listed and/or issued.

Exemplary Embodiment of Emerging Markets Financial Objects Index 102431 In one or more exemplary emboditnents, an index may be created by selecting and weighting emerging market debt instruments, such as, for example, but not limited to, bonds, using metrics not tnaterially influenced by price, e.g., face value for the debt instrument. In an exemplary embodiment, a developed market debt and/or a developed market except the US debt instrument, for example, may be provided. An exemplary embodiment of an emerging market bond index may include an Emerging Market Bond Fundamental Index OO available from Research Affiliates, LLC of Pasadena, CA USA. In addition to the written description and figures hereof, Tables 10, 11, 12,, below, provide detailed support for exemplary embodiments.
Various metrics may be used to select and/or weight financial objects, where the objects may include debt instruments. In an exemplary einbodiment, if an issuer of the bond is, e.g., a country, country-based metrics may be used.
102441 In some cases, particular numerical metrics may first need to be derived from publicly accessible data sources (see, e.g., Table I1). For example, a rating universe may be converted, according to an exemplary embodiment, into a numeric value as shown in an exemplary embodiment, see Table 11. For example, BBB debt may be given a value of, e.g., but not limited to, 1, BB debt may be assigned a value of, e.g., but not limited to, 2, CCC debt may be assigned a value of, e.g., but not Iimited to, 4, etc. Once debt has been assigned to at least one debt rating, by at least one rating agency, then debt may be segmented according to rating, for example.
102451 Weighting according to an exemplary embodiment may include averaging over a giventime period, such as, e.g., but not Iimited to I year, 2 years, 5 years, or any other suitable time period. In certain cases, if a bond has been recently issued, some data may not yet be available, thus data using a time lag may be used to provide more complete data, such as, e.g.
but not Iimited to, a 1 year, 2 year, 3 year or more lag, or one or more days, weeks, and/or months of time lag may be used.
102461 The issuing governments of debt instruments from regions considered to be emerging markets may issue emerging market debt instruments, such as, for example, emerging market bonds. Emerging market debt instruments may be purchased, held, and traded just as any debt instruments from any other inarket. An emerging market debt instrument may be different from any other debt instrument only in that the issuer of the emerging market debt instruinent may be the governinent of a region considered to be an emerging market and/or may be issued from a company from an emerging market and/or developing country, for example.
102471 In exemplary embodiments, emerging -narket debt instrument data from one or more countries and/or sovereigns which issue bonds may be used. For example, in certain exemplary embodiments, JP Morgan and/or MERRILL LYNCHOK emerging market data may be used, though any type of market data relating to debt instruments issued in all markets may be used, and a selection of these debt instruinents may be made from the universe of debt instrument data using a predefined threshold for example, for any entity, any issuer, any organization, region, individual, country, sovereign municipality, geographic region or the like.
102481 In an exemplary embodiinent, a first entity's emerging market data may be correlated with a second company's emerging market data. For example, in an exemplary embodiment, a MERRILL LYNCHOO emerging market debt instrument data may be used, and a correlation (for example, 99.6% in certain exemplary embodiments) may be established with the data of JP
Morgan.
102491 In an exemplary einbodiment, unlike with stocks, there may not be traditional accounting data metrics associated with, e.g., a country which issues a debt instrument.
Accordingly, no "sales," "book values," and the like may be associated with or related to, for example, the emerging market (EM) debt for a region, such as a sovereign entity. In one or more exemplary embodiments, a broad range of data may be used to measure characteristics or factors. According to one exemplary embodiment, data associated with the issuing entity may be used as a data metric according to which a selection of debt instruments may be selected, and according to which weighting may be calculated for selected constituents of the index.
According to an exemplary embodiment, data regarding an entity such as, e.g., a geographic region such as a country may be used. A data source may be created and inaintained, or may be used if available from a third party. For example, a CIA database about country data may be used as a data source from which debt instrunients associated with countries may be selected and weighted according to data values of fields of a country record in the database. In certain exemplary embodiments, such characteristics or factors may be referred to as fundamentals, data metrics, measures, or elements available from one or more sources (for example, databases such as the CIA World Factbook, a Farmer's Almanac, State Department statistics, Population: US
Census Bureau (2005), Area: CIA World Factbook (2006), GDP: World Bank Statistics (2004), Oil Consumption: CIA World Factbook (2005), Corruption: Transparency International, Democracy: Freedom House, Freedom in the World (2001), Expenditures: CIA World Factbook (2006), GNI: World Bank Statistics (2004), Debt: CIA World Factbook (2005), MERRILL
LYNCH Emerging Markets Data: IGOV from Bloomberg (Foreign Sovereign debt BBB+
and lower) and any other publicly available data pertaining to countries or sovereigns) from which information retrieval may be performed.
102501 Table 10 depicts an exemplary summary of metrics and observed results for exemplary e-nerging inarket bonds. The following parameters are included: (i) Mean refers to a mean inonthly return; (ii) Min refers to a minimuin monthly return; (iii) Max refers to a maximum monthly return; (iv) Std Dev refers to a standard deviation from the inean; (v) RMSE
is the root mean squared error, i.e., a tracking error; (vi) Rating I and Rating 2 are numerical ratings, as defined in Table 11; (vii) OAS (option adjusted spread, or optionality factor) is an adjusted measure of the spread of the yield of a given bond over the treasury yield; (viii) Modified Dur (duration) represents the time-weighted average of cash payments scaled by the bond yield, providing a measure of sensitivity of the bond price to interest rate movements;
and/or (ix) Observations are the number of data points based on an exemplary 9 years of data (with an exemplary monthly frequency). In an exemplary embodiment, modified duration is an adjustment of a Macaulay duration, which is a discounted cash flow weighted duration.

Table 10.
Merrill Lynch Emerging Markets Data (Foreign Sovereign debt BBB+ and lower) Sample: Jan 1998-Jan Modified Obser-2007 Mean Min Max Stderr RMSE ratin 1 rating2 OAS Dur vations Reported Benchmark 0.950 29.17 8.60 0.394 Cap Weighted -(Constructed) 0.950 29.26 8.61 0.395 0.078 1.17 1.99 498.4 5.53 108 Equal Weighted -(constructed) 0.999 23.93 7.94 0.333 0.858 1.17 2.38 506.9 4.96 108 1- r La ed 1.070 24.95 10.82 0.379 0.808 1.15 1.83 542.2 5.23 108 2-yr Lagged 1.053 23.35 10.79 0.380 1.001 1.17 1.64 496.1 5.13 108 3-yr Lagged 0.942 22.50 9.89 0.362 1.019 1.20 1.46 470.2 5.10 108 Fundamental Measures (1) Population 1.029 15.51 8.40 0.262 0.86 2.03 401.4 4.73 108 Area 1.355 38.16 16.64 0.541 1.34 3.23 714.5 4.58 108 GDP 1.059 18.65 9.79 0.303 0.91 2.15 434.9 4.78 108 Oil Consumption 1.143 24.92 11.67 0.377 1.08 2.54 514.3 4.85 108 Corruption Index 0.986 21.83 7.59 0.316 1.11 2.56 471.3 5.07 108 Democracy Index 0.955 21.99 8.16 0.329 1.12 2.53 477.0 5.28 108 Expenditures 1.076 20.93 10.79 0.335 1.00 2.36 457.3 4.92 108 GNI 1.026 20.27 12.01 0.346 0.98 2.30 450.9 5.05 108 Debt 1.197 26.83 13.06 0.413 1.11 2.60 544.8 4.97 108 EW Each Factor 1.177 25.12 11.77 0.385 1.03 2.40 520.6 4.86 108 GDP/Population 0.996 22.69 8.15 0.328 1.10 2.55 479.6 5.06 108 Oil -Consum tion/Po ulation 1.032 24.59 8.02 0.333 1.25 2.98 508.4 4.92 108 Ex enditures/Po ulation 1.103 18.20 6.84 0.271 1.04 2.42 427.2 4.93 108 GNI/Population 0.876 19.66 8.02 0.312 1.08 2.54 453.9 5.20 108 Debt/GDP 0.936 21.86 8.65 0.295 1.23 2.92 510.8 4.76 108 Fundamental Measures (2) Population 0.934 14.37 6.39 0.209 0.82 1.93 366.0 4.49 108 Area 1.232 34.59 15.00 0.452 1.11 2.62 614.0 4.44 108 GDP 0.957 16.12 6.36 0.231 0.78 1.81 360.4 4.56 108 Oil Consumption 1.039 21.35 7.71 0.288 0.93 2.16 428.2 4.64 108 Corruption Index 0.933 18.34 7.19 0.251 0.90 2.06 403.9 5.06 108 Democracy Index 0.951 18.37 7.01 0.264 0.98 2.20 430.1 5.13 108 Expenditures 0.984 17.45 6.50 0.250 0.82 1.89 372.6 4.71 108 GNI 0.968 17.29 6.64 0.259 0.84 1.97 382.5 4.93 108 Debt 1.061 22.70 8.51 0.308 0.96 2.23 458.9 4.80 108 EW Combination 1.035 21.46 8.08 0.293 0.87 2.00 439.2 4.67 108.
GDP/Population 0.949 17.55 6.34 0.243 0.87 2.00 391.4 4.86 108 Oil -Consum tion/Po ulation 0.967 18.37 6.89 0.244 1.01 2.35 414.5 4.87 108 Ex enditures/Po ulation 0.915 12.59 4.93 0.187 0.71 1.62 332.1 4.69 108 GNI/Population 0.867 14.08 5.33 0.222 0.89 2.07 386.1 5.10 108 Debt/GDP 0.877 17.53 7.73 0.244 1.00 2.36 476.3 4.80 108 Fundamental measures (1) applies thecountry weight directly to each security issued by the country Fundamental measures (2) splits the country weight equally amongst all securities issued by that country in a given month (all returns in percent per month) 102511 Table 1 I depicts an exemplary numerical identification for bond ratings.
Table 11.
Exem lar Numerical Key for Bond Ratings credit rating 1: credit ratin 2:

102521 Table 12 depicts exemplary country metrics as may be used for weighting emerging market and/or currency financial objects.

Table 12.
Esem lary Country Metrics oil Co Cons- rr- Deni 1'opu- Area umlr upt o- Ecpendi-Countrv Code lation sc NI GDP tion ion cracv tures GNI Debt 212,300,00 3075000000 227100 AI geria 1 32531853 919590 0,000 209000 2.8 1.5 0 51028000000 00000 483,500,00 3998000000 Ar gentina 3 39537943 1068296 0,000 486000 2.8 5.5 0 260000000000 13,010,000 468200 Bahtain 5 688345 257 ,000 40000 5.8 3447000000 7246280000 0000 4,569,000, 668000 Barbados 7 279254 166 000 10900 6.9 886000000 2613990000 000 1492,000,0 1724000000 214900 13razil 10 186112794 3286470 00,000 2199000 3.7 4.0 00 529000000000 000000 61,630,000 1090000000 120500 Bulgaria 8 7450349 42822 ,000 94000 4.0 4.5 0 13240800000 00000 169,100,00 2475000000 431500 Chile II 15980912 292258 0,000 240000 7.3 5.0 0 70619200000 00000 130631381 7,262,000, 4243000000 113000000000 197800 China 12 2 3705386 000,000 4956000 3.2 0.5 00 0 000000 281,100,00 4877000000 382600 Colombia 13 42954279 439733 0,000 252000 4.0 3.0 0 81551500000 00000 37,970,000 . 536600 Costa Rica 14 4016173 19730 ,000 37000 4.2 5.5 3195000000 15715300000 0000 Cote 24,780,000 118500 d'Ivoire 22 17298040 124502 ,000 32000 1.9 1.5 2830000000 10258500000 00000 50,330,000 1935000000 235600 Croatia 15 4495904 21831 ,000 89000 3.4 4.5 0 19916700000 00000 Dominican 55,680,000 656700 Re ublic 16 8950034 18815 .000 129000 3.0 5485000000 18954900000 0000 49,510,000 156900 Ecuador 17 13363593 109483 ,000 129000 2.5 4.0 13957900000 00000 316,300,00 2768000000 303400 Egypt 2 77505756 386660 0,000 562000 3.4 1.5 0 00000 El 32,350,000 657500 Salvador 18 6704932 8124 ,000 39000 4.2 4.5 3167000000 13030700000 0000 226,400,00 1034000000 655100 Greece 19 10668354 50942 0,000 405700 4.3 5.0 00 121000000000 00000 59,470,000 495700 Guatemala 36 14655189 42042 ,000 61000 2.5 3.5 4041000000 19569100000 0000 149,300,00 5834000000 423800 Hun garv 20 10006835 35919 0,000 140700 5.0 5.5 0 49161600000 00000 827,400,00 5770000000 135700 Indonesia 21 241973879 741096 0,000 1183000 2.2 3.5 0 145000000000 000000 89,800,000 2400000000 939500 Iraq 39 26074906 168753 .000 383000 2.2 0.0 0 0 00000 11,130,000 496200 Jatnaica 23 2731832 4244 ,000 66000 3.6 5.0 3210000000 7256730000 0000 Jordan 24 5759732 35637 25,500,000 103000 5.7 3.0 4688000000 8784960000 768300 .000 0000 liazakhsta 118,400,00 1244000000 244500 n 25 15185844 1049150 0.000 189400 2.6 1.5 0 20078200000 00000 18,830,000 207900 Lebanon 26 38260t8 4015 .000 t07000 3.1 t5 6595000000 17585000000 00000 74,300,000 3462000000 488400 Malavsia 27 42909464 261969 ,000 60950 5.1 2.0 0 79326600000 00000 1,006,000, 1840000000 159800 Mexico 28 106202903 761602 000.000 1752000 3.5 4.5 00 550000000000 000000 t34,600,00 1677000000 173200 Morocco 29 32725847 172413 0,000 167000 3.2 25 0 34681400000 00000 125,700,00 1354000000 310700 Nigeria 30 128771988 356667 0,000 275000 1.9 3.0 0 37132000000 00000 347,300,00 2007000000 335400 Pakistan 38 162419946 310401 0,000 365000 2.1 1.5 0 60047300000 00000 20,570,000 883400 Panama 31 3039150 30193 ,000 40520 3.5 5.5 3959000000 9455180000 0000 155,300,00 2247000000 299500 Peru 32 27925628 496223 0,000 161000 35 35 0 52209300000 00000 430,600,00 1577000000 579600 Phili ines 33 87857473 115830 0,000 338000 2.5 4.5 0 80844900000 00000 463,000,00 6322000000 868200 Poland 34 38635144 120728 0,000 424t00 3.4 5.5 0 164000000000 00000 19,490,000 1131000000 175000 Qatar 35 863051 4416 ,000 30000 5.9 0 00000 1,408,000, 1256000000 175900 Russia 41 143420309 6592735 000,000 2310000 2.4 2.0 00 253000000000 000000 Serbia and Iv9ontenegr 26,270,000 1112000000 0 42 10829175 39517 ,000 64000 2.8 0 78,890,000 2320000000 Slovakia 43 5431363 18859 ,000 82000 4.3 55 0 20307200000 South 491,400,00 7062000000 Africa 44 44344136 471008 0,000 460000 4.5 5.5 0 122000000000 South 925,100,00 1890000000 t30300 Korea 37 48422644 38023 0,000 2070000 5.0 5.0 00 000000 524,800,00 3176000000 Thailand 45 65444371 198455 0,000 785000 3.8 4.5 0 118000000000 Trinidad and 11,480,000 Tobat;o 46 1088644 1980 ,000 24000 3.8 5.0 4060000000 7808790000 70,880,000 Tunisia 9 10074951 63170 ,000 87000 4.9 1.5 8304000000 19984500000 508,700,00 1153000000 Turke y 47 69660559 301382 0,000 619500 3.5 2.5 00 167000000000 299,100,00 2298000000 Ukraine 48 47425336 233089 0,000 303000 2.6 3.0 0 35185000000 49,270,000 Unigiiay 49 3415920 68039 ,000 41500 5.9 6.0 4845000000 19189400000 145,200,00 4127000000 Venezueta 50 25375281 352143 0,000 500000 2.3 3.0 0 227,200.00 1295000000 Vietnam 51 83535576 127243 0,000 t85000 2.6 0.5 0 32761600000 102531 In accordance with one or more exemplary embodiments, such data elements or fundamentals may comprise any one of: an economic metric; a population or demographic based measure; a population level; an area; a geographic area; an economic factor; a gross domestic product (GDP); GDP growth; a natural resource characteristic; a petroleum characteristic; a resource consumption metric; a petroleum consumption amount; a liquid natural gas (LNG) characteristic; a liquefied petroleum gas (LPG) characteristic; an expenditures characteristic;
gross national income (GNI); a debt characteristic; a rate of inflation; a rate of unemployment; a reserves level; a population characteristic; a corruption characteristic; a democracy characteristic; a social metric; a political metric; a religious metric; a per capita ratio of any of the foregoing or any other characteristic; a rate change in any of the foregoing metrics; a derivative of any foregoing or any other characteristic and/or a ratio of two of the foregoing or any other characteristics. Examples of the foregoing, not to be interpreted by way of limitation, are provided in the following table. In certain exemplary embodiments, certain of the foregoing may not be proper measures of the relative size (and/or other characteristics) pertaining to an entity, region, country, or the like but may be indicative of useful measures for selecting and weighting constituents of a index according to an exemplary embodiment.
102541 In an exemplary embodiment, one or more such factors, data metrics, measures, characteristics and/or fundamentals may be applied to select and to weight constituents to construct a bond index in one of a number of ways. A fundamental weight into, for example, a sovereign debt, may be a first such way. One or more metrics may be used to select debt instruments and one or more metrics may be used to weight the constituent selected debt instruments to construct the index. However, the data inetric does not use a price-based metric, i.e., the metric will not be the selection and weighting according to products of total debt and market price. An exemplary first way is in a way that applies, for example, to a weight associated with (i) an issuer; (ii) an entity (including a region or country) associated with such issuer; (iii) where such issuer and such entity are the same; and/or (iv) where a combination of the foregoing, may be applied directly (or indirectly in an alternative embodiment) to each financial object (including, for example, a bond, or a security) issued by such foregoing entity(ies). As one example, a fundamental inetric may be used to select weight, and may be applied to determine or calculate a constituent weighting for a given debt instrument issued by a sovereign in a first way, wherein in such first way, the country weight is directly applied to each financial object (for example, a security and/or a bond) issued by the country. According to an exemplary embodiment, a plurality of data ineasures may be used. A weighted average such as, for example, an equally weighted average of data factors, may be used. In one exemplary embodiment, if a given data metric is believed to be suspect, such as, e.g., geographic area, so that use of the data factor may result in taking on too much risk, a particular rules based threshold such as a predetermined maximum or minimum weighting ceiling or floor may be used to prevent overexposure to a suspected excess risk factor.

102551 An exemplary second way of weighting debt instruments may apply, for example, to a weight associated with (i) an issuer; (ii) an entity (including a region or country) associated with such issuer; (iii) where such issuer and such entity may be the same;
and/or (iv) where a combination of the foregoing, is applied in an apportioned manner among either all (or in an alternative embodiment, a portion of) the foregoing, in relation to one or inore additional parameters. As one example, a fundamental weight may be applied to the debt instruments issued by of a sovereign in a second way, wherein in such a second way, the country weight may be split such as, e.g., but not Iimited to equally amongst all the debt instruments (for example, a security and/or a bond) issued by a country in a given month.
102561 In certain exemplary enibodiments, a nuinber of inethods may be employed so as to select, weight, or to measure certain characteristics and/or factors associated with one of the foregoing entities (i)-(iv). In an exemplary such embodiment, a factor, data metric, and/or characteristic associated with a geographic region (such as a country, in an exemplary einbodiment thereof) may be measured. In order to select emerging inarket data, a predetermined data element value may be used, such as, e.g., countries with per capita oil consumption of less then or equal to a given value, for example, or per capita GDP of a given amount or less. For example, there may be many ways to measure a country's scale and/or size as compared to the rest of the world. Exainples include, without Iimitation, any factors and/or characteristics associated with or related to, without limitation, any one or combination of the foregoing: economic factors, demographic factors, social factors political factors, the population, area, geographic area gross domestic product (GDP), GDP growth, natural resources, oil (or any other energy source) consumption, expenditures, government expenditures, gross national income (GNI), measures of freedom, democracy, and corruption, rate of inflation, rate of uneinployment, reserves level, and/or total debt, etc. Additional examples may include any ratio of the foregoing or other factors and/or characteristics, as derived solely from one or more of the foregoing or other factors and/or characteristics, and/or as derived in combination with one or more additional factors and/or characteristics.
102571 In one or more exemplary embodiments, the foregoing methods and/or systems employing such methods exhibited positive results. For example, in an exe-nplary embodiment, a RAFI einerging markets measure may outperform a value weighting measure.
For example, in one such exemplary embodiinent, such emerging markets measure may outperform value weighting to add a certain amount (in one embodiment, 3.3% or the like) per annum above a cap-weighted emerging markets index.
102581 In certain exemplary embodiments, not by way of Iimitation, the foregoing exemplary geographic area metric may provide superior results as a fundamental metric. In an exemplary embodiment, a RAFIO equal weighted measure using an exemplary equal weighting of 9 exemplary data inetrics, namely population, area, etc (see table 13) outperforms all (or in alternative embodiments, one or more of) other single metrics of a factor and/or characteristic for one of the foregoing categories (i)-(iv), such as for example the size of a country. In an exemplary embodiment, results are not quite statistically significant, but t-statistics of approximately 1.8 on a multi-year (for example, 9 year or the like) sampling of data are found.
102591 In varying exemplary embodiments, factors and/or characteristics either not associated with, not related to, or alternatively, not the same as a given measure may be used. As one example thereof, a measure that is either not or not associated with size may be used. As one such example, such non-size measures as one or inore indices associated with or related to the corruption (for example, a corruption index) and/or the relative amount of democracy (for example, a democracy index) may be used. As noted, in one or more exemplary embodiments, a ratio of any and/or all of the foregoing factors and/or characteristics may be used, in combination with one another and/or with other factors. As one example, ratios of such items such as, e.g., but not Iimited to population adjusted per capita measures of GDP, oil consumption, expenditures, GNI, debt, in any combination thereof, may be used.
Similarly, ratios of a measure to geographic area may be calculated and maybe added to a weighted average, such as, e.g., but not limited to, an equal, and/or non-equal weighting of a plurality of factors. In exemplary einbodiments, the market may efficiently factor the foregoing into pricing, such that the foregoing do not add value to the weighting. In exemplary embodiments, size measures may relatively add value because over- or under-valuation of a country's debt may be more-or-less independent of such measures. In some cases if a given measure may skew to a liinited diversification, a proportional weighting factor may be used to avoid undue risk. In certain embodiments, the foregoing applies to the description hereof with respect to equities.
102601 Once an index is created by selecting and weighting debt instruinents from emerging markets in proportion to weighting factors, then a portfolio of debt instruments may be purchased as selected by the index in proportion to the weightings as indicated by the index In such exemplary embodiments, the RAFIO debt instrument portfolio system may perform strongest in weak equity markets, though in alternative embodiments, the RAFIO
debt instrument portfolio system may perform strongest in strong equity inarkets.
In exemplary embodiments, the former.embodiments apply to embodiments incorporating emerging markets.
102611 Table 13 depicts exemplary alpha (risk adjusted return) and t-stats (point estimation coefficient divided by standard error) for exemplary country related objective metrics.

Table 13.
Measure p Population 2.1% 0.8 Area 4.7% 1.5 GDP 2.2% 1.0 Oil Consumption 2.8% 1.8 Expenditures 2.2% 1.2 GNI 1.5% 0.8 Total Debt 3.3% 1.9 RAFIOO EM 3.3% 1.8 Equal Wgt Countries 1.1% 0.9 Corruption 1.0% 0.7 Democracy 0.5% 0.4 GDP per capita 1.1% 0.8 Oil per capita 1.5% 1.3 Exp per capita 1.7% 0.8 GNI per capita -0.3% -0.2 Debt/GDP 0.6% 0.3 Exemplary Embodinients of Currency 102621 In one or more exemplary embodiments, an index may be created by selecting and/or weighting currency, including hard currencies and/or related currency instruments, such as, for example, but not limited to, bonds or currency derivatives, using metrics not materially influenced by currency value. Weighting according to an exemplary embodiment may include averaging over a given time period, such as, e.g., but not limited to 1 year, 2 years, 5 years, or any other suitable time period.

102631 Currency inay be a primary economic unit of exchange. All items that may be purchased, such as, for example, but not limited to, goods, services, raw materials, land, financial objects, etc. may be valued in terms of currency, and currency may be exchanged for any of the foregoing and vice versa. Organizations such as, for example, but not limited to, countries, states, provinces, municipalities, sovereigns, and/or organizations composed of any number of the foregoing, may issue and/or control their own forms of currency.
For example, the United States of America issues the United States Dollar. The European Union, composed of various countries, issues the Euro-dollar. Japan uses the Yen. Britain uses the Pound Sterling. The currency of an issuer may generally, but not always, be the only currency accepted in most day-to-day economic transactions, such as, for example, but not limited to, the purchase of goods and services, within the boundaries of the issuer's authority. For example, in the area in which the US government has governing authority, US dollars are generally the only acceptable currency for the purchase of items from stores or for the purchase of services.
Currencies froni different issuers may be exchanged for each other according to prevailing exchange rates. The exchange rates may indicate the value of currencies relative to other currencies.
102641 One may invest in currency through the purchase of one or more currencies by a purchaser, using one or more other currencies. For example, a purchaser may use US dollars to purchase Euros, according to the prevailing exchange rates, if the purchaser believes the Euro will appreciate against the US dollar. There may also be a number of financial objects, or foreign exchange (currency or FX) instruments associated with currencies. For example, there inay a number of currency derivatives including, for example, but not Iimited to, currency options such as currency puts and currency calls, currency futures, etc.
102651 In exemplary embodiments, currency data from one or more countries and/or sovereigns which issue currency may be used. Any type of market data relating to currency related instruments issued in any and/or all markets may be used, and a selection of the currency related instruments may be made from the universe of currency related instrument data using a predefined threshold such as, for example, but not Ii-nited to, for any entity, any issuer, any organization, region, individual, country, sovereign municipality, geographic region and/or the like. Exemplary currency data for the spot exchange rate may be obtained from, e.g. the Board of Governors of the Federal Reserve Syste-n, and may be downloaded, for example, from Bloomberg of New York, NY, among other services. Exemplary pricing and returns data for currency futures and/or other derivatives may be obtained from, e.g., but not Iimited to, Commodity Research Bureau (CRB), and/or from Bloomberg, etc. Exemplary data for government fixed income instru-nents may be obtained from, e.g., Bloomberg.
Information on a country's characteristics and economic variables inay be obtained from, for example, the U.S.
Central Intelligence Agency (CIA) World Factbook, Global Financial Data, Bloomberg, and/or Center for International Comparisons at the University of Pennsylvania, etc.
102661 In an exemplary embodiment, a first entity's currency related instrument data may be correlated with a second country's currency and related instruments.
102671 Unlike with stocks, a currency instrument may not have traditional accounting data metrics associated with the instrument, or with the country that issues the currency.
Accordingly, no "sales", "book value" or the like may be associated with or related to, for example, the currency for a region, or a sovereign entity. In an exemplary embodiment, a broad range of data may be used to measure characteristics or factors. According to one exemplary embodiment, data associated with the currency-issuing entity may be used for selecting and/or weighting currency or currency-related instruments to construct the index.
According to an exemplary embodiment, data regarding an entity such as, e.g., a geographic region such as, e.g., but not limited to, a country may be used. A data source may be created and maintained, and/or may be used if available from a third party. For example, a CIA factbook and/or other databases about country data may be used as a data source from which currency instruments associated with countries may be selected and weighted according to data values of fields of a country record in the database. In certain exemplary embodiments, such characteristics, metrics, measures and/or factors may be referred to as data metrics, measures, parameters and/or elements available froin one or more sources (for example, databases such as, e.g., but not Iiinited to, the CIA World Factbook, etc.) from which information may be retrieved.
102681 In accordance with one or more exemplary embodiments, such data elements, measures, and/or metrics may comprise any one or more of, e.g., but not limited to: a demographic measure; a population level; an area; a geographic area; an economic factor; a gross domestic product (GDP); GDP growth; a natural resource characteristic; a petroleum characteristic; a resource consumption metric; a petroleuin consumption amount; a liquid natural gas (LNG) characteristic; a liquefied petroleum gas (LPG) characteristic; an expenditures characteristic; gross national income (GNI); a debt characteristic; a rate of inflation; a rate of unemployment; a reserves level; a population characteristic; a corruption characteristic; a democracy characteristic; a social metric; a political metric; nominal interest rates and the ratios of nominal interest rates between issuing sovereign entities; commercial paper yield inetric;
credit rating metric; consumer price index (CPI); purchasing power of local currency inetric;
country current account flow; metrics measuring relations between the purchasing power of local currency metric and noniinal exchange rates and deviations from historical trends in such -netrics; government exchange rate regime; a per capita ratio of any of the foregoing or any other characteristic; and/or a derivative of any foregoing or any other characteristic and/or a ratio of two of the foregoing or any other characteristics. In certain exemplary embodiments, certain of the foregoing may not be proper measures of the relative size (and/or other characteristics) pertaining to an entity, region, country, or the like but may be useful measures for selecting and weighting constituents of a index according to an exemplary embodiment.
102691 In an exemplary embodiment, one or more such metrics and/or measures, para-neters and/or characteristics may be applied to select and/or to weight constituents to construct a currency and/or currency related instrument index in any of a number of ways.
A currency may be selected and/or weighted using a coinbination of one or more metrics. One or more metrics may be used to select currency and/or related currency instruments and one or more metrics may be used to weight the selected constituent selected instruments to construct the index. An exemplary method of selecting or waiting may include applying, for example, a weight associated with (i) an issuer; (ii) an entity (including a region or country) associated with such issuer; (iii) where such issuer and such entity are the same; and/or (iv) where a combination of the foregoing, may be applied directly (or indirectly in an alternative embodiment) to each currency related instrument (including, for exainple, a currency derivative) issued by such foregoing entity(ies). As one example, a fundamental metric may be used to select weight, and inay be applied to determine, compute, and/or calculate a constituent weighting for a given currency issued by a sovereign or related currency instrument in a given way, wherein in such way, the country weight may be directly applied to each currency and/or related currency instrument (such as, for example, but not Iimited to, a currency derivative) issued by a country or other entity. According to an exemplary embodiment, a plurality of data measures and/or metrics may be used. A weighted average such as, for example, an equally weighted average of data factors, may be used. In one exemplary embodiment, if a given data metric is believed to be suspect, such as, e.g., geographic area, so that use of the data factor may result in taking on too much risk, a particular rules based threshold such as, e.g., but not limited to, a predetermined maximum and/or minimum weighting ceiling and/or floor may be used to prevent overexposure to a suspected excess risk factor.
102701 Another exemplary embodiment of selecting and/or weighting currency and/or currency related instruments may apply, for example, to a weight a metric associated with (i) an issuer; (ii) an entity (including a region and/or country) associated with such issuer; (iii) where such issuer and such entity inay be the same; and/or (iv) where a combination of the foregoing, may be applied in an apportioned manner among either all (or in an alternative embodiment, a portion of) the foregoing, in relation to one or more additional parameters.
102711 Various exemplary einbodiments, or combinations of others noted herein, may also be used.
102721 In certain exe-nplary embodiments, a number of inethods niay be employed so as to select, weight, and/or to measure certain characteristics, metrics, measures, parameters and/or factors associated with one of the foregoing entities (i)-(iv). In an exemplary such embodiment, a factor, data metric, measure, parameter, and/or characteristic associated with, e.g., but not Iiinited to, a geographic region (such as a country, in an exemplary embodiment thereof) may be measured. In order to select currency data, a predetermined data element value may be used, such as, e.g., but not Iimited to, countries with an inflation rate of, e.g., but not Iimited to, less than or equal to a given value, for example, or, e.g., but not limited to, per capita GDP of a given amount or less. For example, there may be many ways to measure a country's scale or size relative to the rest of the world, or a relevant portion of the world, for example. Exemplary embodiments may include, without limitation, any metrics, measures, parameters, factors and/or characteristics associated with and/or related to, without limitation, any one or combination of the foregoing: economic factors, demographic factors, social factors political factors, the population, area, geographic area gross domestic product (GDP), GDP growth, natural resources, oil (or any other energy source) consumption, expenditures, government expenditures, gross national income (GNI), measures of freedom, democracy, and corruption, rate of inflation, rate of unemployment, reserves level, and/or total debt, etc. Additional examples inay include, e.g., but not limited to, any ratio of the foregoing or other factors and/or characteristics, as derived solely from one or more of the foregoing or other factors and/or characteristics, and/or as derived in combination with one or more additional factors and/or characteristics.

102731 In one or more exemplary embodiments, the foregoing methods and/or systeins employing such methods to select or weight a currency instrLnnent index may exhibit positive results as compared to conventional weighting measures.
102741 In . certain exemplary embodiments, not by way of Iimitation, the foregoing exemplary geographic area metric may provide superior results as an accounting data and/or country-data based metric.
102751 In varying exemplary embodiments, factors and/or characteristics either not associated with, not related to, or alternatively, not the same as, a given measure may be used.
As one example thereof, a measure that is not size, or not associated with size, may be used. As one such example, such non-size related measures may include, e.g., but not limited to, a metric related to corruption (e.g., but not limited to, a corruption index) and/or the relative amount of democracy (e.g., but not limited to, a democracy index) may be used.
As noted, in one or more exemplary embodiinents, a ratio of any one or more, and/or all of the foregoing nietrics,"measures, parameters, factors and/or characteristics may be used, in combination with one another and/or with other factors. As one example, ratios of such items such as, e.g., but not Iimited to, population adjusted per capita measures of GDP, oil consumption, expenditures, GNI, debt, in any combination thereof, may be used. Similarly, ratios of a measure to, e.g., but not Iimited to, geographic area, may be calculated and -naybe added to a weighted average, such as, e.g., but not Iimited to, an equal, and/or non-equal weighting of a plurality of factors. In exeinplary embodiments, the market inay efficiently factor the foregoing into pricing, such that the foregoing does not add value to the weighting. In exemplary embodiments, size measures may relatively add value because over- or under-valuation of a country's debt may be more-or-less independent of such measures. In soine cases if a given measure may skew to a Iimited diversification, a proportional weighting factor inay be used to avoid undue risk. In certain exemplary einbodiments, the foregoing may apply to the description hereof with respect to other financial objects.
102761 Once an index is created by selecting and/or weighting currency and/or currency related instruments in proportion to weighting factors, then a portfolio of currency and/or related instruments may be purchased as selected by the index in proportion to the weightings as indicated by the index. In such exemplary embodiments, the currency portfolio system may forin part of a diversified portfolio of portfolios to help take advantage of positive currency inarket impacts.

E.reniplarj, Emhodinrents of Comniodities 102771 In one or more exemplary embodiments, the index may be a conunodities index.
102781 Commodities may be raw materials such as, e.g., but not Iiinited to, wheat, corn sugar, soybeans, soybean oil, oats, rough rice, cocoa, coffee, cotton, lean hogs, pork bellies, live cattle, feeder cattle, WTI crude oil, light sweet crude oil, brent crude, natural gas, heating oil, gasoline, Gulf Coast gasoline, propane, uranium, iron, gold, platinum, palladium, silver, copper, lead, zinc, tin, aluminum, aluminum alloy, nickel, recycled steel, ethanol, rubber, palm oil, wool, coal, and/or polypropylene coal etc. Industries may use commodities, e.g., but not Iimited to, in the production of goods. For example, cereal makers may use wheat in the production of, e.g., but not Iimited to, cereal, and gasoline coinpanies may use light sweet crude oil in the production of, e.g., but not limited to, automotive gasoline. Treasury bills may also be considered to be related to commodities. Although treasury bills are a fixed income instrument, in the context of investment in commodity treasury bills may be collateral for the derivative investment.
102791 One may invest in commodities through the purchase of quantities of the commodities themselves, or through the purchase of derivative instruments, or other financial objects related to the commodities, such as, e.g., but not limited to, commodities futures, commodities options such as, e.g., but not Iimited to, commodities puts and/or commodity calls, and/or commodity forwards. Further, investments may be made in the producer of a commodity, such as, e.g., but not Iimited to, mining companies with respect to a mined product commodity.
102801 The following is an exemplary summary of a construction method for creating an exemplary coinmodities index, including selecting commodities (including commodities, such as, e.g., but not limited to, oil, corn, and/or gold, etc. and related derivative instruments, such as, e.g., but not Iimited to, commodities futures), and from a universe of commodities using a selective metric related to the companies and/or industries responsible for the production and/or consumption of the commodity, and/or weighting the commodity according to at least one objective metric related to the size of the companies and/or industries (including, e.g., but not limited to, industry metrics as noted in Table 2) responsible for the production and/or consumption of the commodity. In an exemplary embodiment the constituents may be selected and/or weighted in relative proportion to, e.g., but not limited to, sales and/or dividends, if any, associated with companies and/or industries responsible for the production and/or consumption of the commodity. According to another exemplary embodiment, other accounting data metrics may be used, however in no case will a metric be used which is materially influenced by share price, such as, e.g., but not Iimited to, the measure of the market value of the total amount of commodities produced and/or traded; the measure of total value of the related financial instruments traded; and/or the market capitalization of the companies and/or industries responsible for the production and/or consumption of the commodities.
102811 In an exemplary embodiment, the nietric used for selection and/or weighting for each group of companies and/or industries responsible for the production and/or consumption of a commodity may be based on a composite company accounting data measure created froin, e.g., but not limited to, a weighting, such as, e.g., but not limited to, equal weighting, of one or a plurality of data metrics. In one such exemplary embodiment, the inetrics may be any one, or more of in combination, (i) normalized, (ii) for a 5-year span, and/or (iii) an average value.
Exemplary factors, measures, parameters, metrics and/or characteristics, may include , e.g., but not limited to, factors based at least partially on any one or more of: sales, book value, cash-flow, dividends if any, total assets, revenue, number of employees, profit margins, and/or collateral, etc.
102821 Further, in an exemplary embodiment, the metric used for selection and/or weighting for each commodity may be a combination of the foregoing the metric for selection or weighting for each group of companies or industries responsible for the production and/or consumption of a commodity, and an index weight based on the total per unit cost of production of a commodity, commodity reserves value, term structure of a future and/or commodity, momentum in price, any seasonal factors that may affect the valuation of the commodity, such as, for example, but not limited to, effect on oil usage and/or crop yields, and/or interest rate, etc.
102831 In an exemplary embodiment, data acquisition inay be time consuming.
Here, according to an exeinplary embodiment, a coinprehensive database may be assembled, compiled, and/or built, i.e. constructed, of companies and/or industries responsible for the production and/or consu-nption of cominodities, and the data may be linked to an existing database of inetrics, such as, e.g., but not limited to, accounting data which may include non-market capitalization and non-price related accounting data indicative of relative company size, with all the normal complications of ticker and Committee on Uniform Security Identification Procedures (cuisp) differences. In alternative exemplary embodiments, expansion of the data through 2006, or other time period, and beyond may be performed.
102841 In exemplary embodiments, the commodities universe may include, e.g., but not limited to, all issues within a particular commodities space. An exeinplary commodities space according to one exemplary embodiment may include, e.g., but not limited to, the MERRILL
LYNCH Global Commodities space. According to one exemplary embodiment, one may begin with a universe of, e.g., but not limited to, all cominodities and/or related derivative instruments. Then, a selection of commodities and/or related derivative instruments -nay be made using at least one accounting data metric associated with the companies and/or industries responsible for the production and/or consumption of the conunodity, wherein the metric is not materially influenced by share price.
102851 In an exemplai-y embodiment, the index may be reconstituted, and/or rebalanced on a periodic and/or an aperiodic basis such as, e.g., but not limited to, every, e.g., but not limited to, month, etc., as futures expire and may fall out of the index.

Exemplary Embodinrents of Real Estate Investment Trust (REIT) Indexes 102861 According to an exemplary embodiment of the invention, an exemplary financial object may include, e.g., but not limited to, a Real Estate Investment Trust (REIT), and/or a Real Estate Holding and Development Company (including, e.g., but not limited to, Real Estate Operating Companies (REOC)). An accounting data based index (ADBI) may be provided, according to one exemplary embodiment, including one or more Real Estate Investment Trusts (REITs), in which the REITs may be selected based on one or more objective metrics and/or measures. In accordance with an exemplary embodiment, REITs may include, e.g., but not Iirnited to, a special tax designation for a corporation that may invest, own, and/or manage real estate. As used herein, REITs may be publicly traded and may be listed on national stock exchanges, including, e.g., but not limited to, the New York Stock Exchange (NYSE), National Association of Securities Dealers Autoinated Quotations systein (NASDAQ), and/or American Stock Exchange (AMEX), (and comparable instruments, to the extent available, on foreign exchanges), etc. A REIT may be publicly traded, or may also be privately held.
The Real Estate Holding & Development subsector may include, e.g., but not limited to, companies that may invest directly, and/or indirectly in real estate through development, management and/or ownership, including, e.g., but not limited to, property agencies. A Real Estate Operating Company (REOC) is similar to a real estate invest-nent trust (REIT), except that an REOC may reinvest its earnings into the business, rather than distributing them to unit holders as REITs do.
Also, REOCs may be more flexible than REITs in terins of what types of real estate investments they may be able to make.
102871 In accordance with one or more exemplary embodiments, ownership of REIT
instruments may be similar to ownership in any other instrument, but in order to qualify for the tax benefits of a REIT, a real-estate company may be required, according to an exemplary embodiment, to distribute a percentage of the income of the REIT, for example, 90%, to its investors, which may be in form of dividends, for example. The REIT status may allow the entity to avoid income tax altogether, or may receive a reduction in taxes, as a result.
102881 In accordance with various exemplary embodiments, a REIT may include, e.g., but not Iimited to, an equity REIT and/or a mortgage REIT. An equity REIT, e.g., may own and operate real estate such as, e.g., but not Iimited to, apartment buildings, regional malls, office buildings, and/or lodging facilities, etc. A mortgage REIT, in an exemplary einbodiment, may issue loans secured by real estate, though mortgage REITs usually do not own or operate real estate. As used herein, the REIT may be a hybrid REIT, which may be involved in both real estate operations as well as mortgage transactions, in one exemplary embodiment.
102891 According to an exemplary embodiment of the invention, an index such as, e.g., but not limited to, RAFIOO REIT available from Research Affiliates, LLC of Pasadena, CA USA, may be constructed by selecting and/or weighting REITs using one or more objective metrics that, in an exemplary embodiment, may not be materially influenced by share price of the REIT
company itself. In one exemplary embodiment, an ADBI composite index may include REITs exclusively, and/or a combination of REITs and other financial objects.
102901 In an exemplary embodiment of the invention, a REIT index may be constructed by selecting and/or weighting REITs based one or more accounting data based metrics and/or measures including, e.g., but not limited to, total assets, adjusted funds from operations (AFFO), revenues, and/or distributions, where distributions may include, e.g., but may not be Iimited to, dividends.
102911 In an exemplary embodiment, the total assets for a REIT, as with any other type of entity, may include, for example, but may not be limited to, the gross assets (e.g., real estate assets) minus the accumulated depreciation in real estate value and/or amortization, as may be required by accounting principles such as the generally accepted accounting principles (GAAP).

However, in an exeinplary embodiment, funds from operations (FFO) may include, for example, but may not be limited to, the net incoine (e.g., revenue minus expenses) plus depreciation and/or amortization. Thus, the AFFO, in an exemplary embodiment, inay represent the cash performance of the REIT, which, in an exe-nplary embodiment, may be a better indicator of the company's performance than earnings, which may include, e.g., but not' limited to, non-cash items. In an exemplary einbodiment, the AFFO may be subject to varying methods of computation, and may be generally equal to the AFFO of the REIT, with adjustments made for recurring capital expenditures used to -naintain the quality of the underlying assets of the REIT, which niay include, e.g., but inay not be limited to, adjustments to straight-line depreciation of, e.g., but not limited to, rent, leasing costs and/or other material factors.
102921 In an exemplary embodiment, one or more financial object metric selection and/or weighting metrics may be determined for each REIT for a predetermined period of time, which may be, e.g., but not be limited to, five years, etc. For example, each of one or more of the metrics, and/or any combination thereof including the revenues of a REIT, AFFO, the total assets, and/or the total dividend distribution, may be averaged for the prior predetermined (e.g., but not limited to, five (5)) years, etc.
102931 In an exemplary embodiment, an overall weight may be calculated for each REIT in the index by, for example, but not limited to, equally and/or otherwise weighting each selection and/or weighting metric. Alternatively, each selection and/or weighting metric may be given a different weight. In an exemplary embodiment, once weights have been determined for each REIT based on the selection and/or weighting metrics , the REITs may then be sorted in, e.g., but not limited to, descending order of the composite selection and/or weighting metrics and may be assigned weights equal to their previously deter-nined weights, as previously described in greater detail.

Exemplary Morleled Economy Emborlimenl 102951 In this exemplary embodiment, a continuous time one factor economy is modeled where stock prices are noisy proxies of informationally efficient stock values. The pricing error process is modeled as a mean-reverting process, which provides a well-defined notion of over-pricing (positive pricing error) and under-pricing (negative pricing error) in the market. In this modeled economy embodiment, cap-weighting may be a sub-optimal portfolio strategy. This is because, in a cap-weighting scheme, portfolio weights are driven by market prices. Accordingly, more weights may be allocated to overvalued stocks and less weight to undervalued stocks. It is also shown that the capital asset pricing model (CAPM) may be rejected in this one factor economy with noise. Additionally, a value tilted or size tilted portfolio inay be predicted to outperform (risk-adjusted). By construction, value and size may not be risk factors in this one factor economy embodiment. However, in the cross-section, large cap stocks and high price-to-book stocks (growth stocks) may tend to underperform. This is because higher capitalization stocks and higher price-to-books stocks may be more likely to be stocks with positive pricing errors. Prices may be explicitly inefficient in this economy embodiment.
However, the inefficiency may not lead to arbitrage opportunities. Mean-reversion in stock returns and the Fama-French size and value effects may be driven by the same inarket defect-pricing noise.
This may suggest that models, such as disposition effect and information herding, which can generate stock price over-reaction and therefore mean-reversion in stock prices, can also explain the value and size question.
102961 In an embodiment, Fama-French value and size factors can be explained quite simply if informational inefficiency in stock prices may be assumed. A simple one factor economy with price noise, where pricing errors are mean-revert ing, can generate the Fama-French return anomalies as well as mean-reversion in stock returns. Given the strong support in the empirical and the behavioral literature that point to excess price volatility (price overshooting) and contrarian profits, the explanation of the Fama-French size and value anomalies may be considered more authentic than explanations based on rational models with hidden risk factors.
In one or more embodiments, the model is able to simultaneously explain stock price inean-reversion and the size and value effects and is able to offer reasonable explanation for the empirical findings from existing literature regarding CAPM, including: (i) the value and size factors may arise empirically (even in a one factor economy) if the market portfolio is a poor proxy for the one hidden risk factor; (ii) the value and size question and the stock price mean-reversion may be anomalies driven by the same market imperfection and may arise quite naturally when stock prices are noisy; and/or (iii) behavioral and rational inodels which may generate stock price overreactions resulting in contrarian strategy profits, may also explain the value and size effect. The aforementioned one factor modeled economy embodiment is described with greater specificity below.

102971 In this embodiment, the risk premium for a stock may depend singularly on its exposure to one unobserved source of aggregate risk (F). Furthermore, it may be assumed that the inark-to-market prices, P, (market prices), deviate from the informationally efficient stock values, V,. For example, P, = V, + e, -that is, market prices are noisy proxies for the informationally efficient values, which are assumed unobservable. In addition, idiosyncratic pricing errors (e,) may be assumed to mean-revert to zero at the speed p.
Consequently, a stock, with a market price greater than its efficient value, may be over-valued and deliver less than its risk-adjusted fair return and vice versa as e, mean-reverts. Since e, may be mean zero, on the average, this price inefficiency may have no impact on expected stock returns.
Additionally, since e, niay be idiosyncratic, a broad based portfolio equally weighted would have almost no aggregate mispricing relative to the efficient valuation. By assumption, in an embodiment the market may not be informationally efficient, so alpha strategies exist; though there may be no arbitrage opportunities. In an embodiment, it inay therefore, be tacitly assumed that investors are not aware of the alpha opportunity (or do not take advantage of it sufficiently) and thus allow such opportunity to persist. Both the pricing error process and the efficient stock value process may be given exogenously. It may be assumed that the exeinplary economy has one aggregate source of risk and a finite number of securities. However, many of the key results may not depend on the pricing model nor the one fact assumption. The true stock value may not be unobservable. The dynamics may be described by dV, _ f; ~dt+/3 dW + 6dW (1) ;6r= r= ~; ~-, V,.
where, (1) /.~ is the drift term and is the instantaneous return for the true value process and is described by p; = rr + A A, (2) where rf is the instantaneous risk free rate and A, is the risk premium for holding one unit of the factor risk exposure. It may be noted that the risk premium formula may be assumed. If the true stock price were observable and tradable, then the above equation (2) may arise naturally in equilibrium in the limit following the APT argument.
The latter explicit relationship between factor exposure and expected returns may not be needed to drive most of the provided results. However, this relationship between factor loading and return may be considered intuitively appealing and may be necessary for analyzing the cross-section return variance and ti-ne series analysis in a CAPM context.

102981 (2) Ais stock i's factor loading.

102991 (3) dW,; is an increment to a standard Wiener process and represents the coinmon factor to all stocks.

103001 (4) dW; is an increment to a standard Wiener process and represent idiosyncratic shocks to the true stock value. Additionally, it may be assumed that E[dW ;dW
j = 0 for i j and E[dW ;dW,: ] = 0.

103011 It may be noted that in an embodiment, there is only one risk factor in the exemplary modeled economy and risk premium may only be earned from holding exposure to this one factor risk.
103021 It may further be assumed that the observed market price may be a noisy proxy for the true stock value. The inarket price may be defined by P,. (3) where U, is defined by U; =1+U;, (4) where U; is a mean-reverting process defined by dU; =(I +U;) (-p;U;dt+(5) where 0<- p; < I and dW,. is an increment to a standard Wiener process. It may be noted that when U,> 0, the market price may be overvalued relative to the fair price.
Additional ly, it may be assumed that E[dW,,_dW,, ]= 0 for i# j, E[dWl.~.dWõj ]= 0 for a] l i and j, and E[dW,.dW,: ]= 0.

The market price dynamics can then be written as dP, = V.dU; +U;dV . (6) Substituting, the following may be obtained dP. =VU;(-p;U;dt+6~~.dW .)+U;V.(p;dt+/3,6,;dW,,,+6,,,dW;). (7) Rearranging, the mark-to-market return process is given by dP
dr-= ' =(/.i,-p.U;)dt+/3,6,._dW, +6,,dW;, (8) P

where =6uid~'rr+(9) and where _ 2 6ri 6Ui + 6.i 2 ' (1O) 103031 It may be noted from equation (8), that the mean-reverting pricing error process does not have an impact on the equity premium, though the cumulative return does suffer from the increased volatility. From equation (8), the mark-to-market return process may be mean-reverting, suggesting that observed stock returns are negatively autocorrelated. While empirical evidences may support negative autocorrelation, the literature may also conclude that the magnitude may be too small or the effect too unreliable to be profitably exploited given the volatility in stock returns. However, in an embodiment, it may be conceded that the mean-reversion in returns can be an uncomfortable prediction, especially in a partial equilibrium model. The 1986 teaching of Summers may be used to argue that standard statistical tests cannot reject the random walk hypothesis even when the true process is strongly mean-reverting;
as such investors may not take large positions to trade on any perceived mean-reversion in stock returns.
103041 The return on a portfolio 0 defined by a vector of weights {1t)õw,....
~.~N} can be written as d;-n wdr =(Ii. -PUn)dt+6R6,:dF+6ndWn, (~ 1) where N
Pf2 - ~j cv; /'i i - rj + 6S2 A e (12) i=1 V
PUn = w;P;vi ~ (13) Y CO;Q;, (14) v J
6f,dWn Zw,6,idW,, , (15) i=1 where N
6n = (0;2 6; (16) and where in the limiting case 6dWR -> 0 as N -> oo.

103051 To derive additional portfolio implications it may be needed to make explicit the portfolio weighting scheme. In the following two sections, the portfolio return dynamics for a cap-weighted portfolio and a non-cap-weighted portfolio are considered.
103061 For simplicity and without loss of generality, it may be assumed each company issues only I share of stock (therefore market price and market cap are the same). The cap-weighted portfolio may be the defined by the following vector of weights CWtI'n'-,...P''~, (17) P, P, Pr where P P> (18) ;-~
The return on the cap-weighted portfolio may then be drtav = (f<<ai, - PUr: n, )di + 6c=iv6l: dF + 6(,.wdwciv ~ (19) where _ N P, = (20) ~i=1 P ~~ ~ - YI + ~(~li, /1~ , PUc:w = I~_i f;r P%U, _ I; i Pt P; ~I +U;)U; , (21) =IN P (22) A:ii N
6clydWos, _ Y_;-i P 6,.;dW. (23) and where 6c,,,dW,.,,, -> 0 as N-> ao.

103071 Rewriting the drift term for the portfolio dynamics in (19), the following may be obtained N 1 2 N , (24) ;_, 7 P;U; ;_~ ,;. P;U where -1N, _ P;V.U;' is strictly negative except when P;= 0 for all i (when pricing errors are not mean-reverting but random walks). The latter may be used to assert that cap-weighting leads to a drag in portfolio expected return.

103081 While there may be only a finite number of stocks (this is both realistic and necessary to prevent arbitrage in our economy), the exposition may be more clear when the limiting case expression is examined. Though not necessary for the results provided here, the latter format may be used throughout the explanation hereof for improvement of intuition.
h' h; N h 2 103091 In the limiting case, 1i-,,-_ p,Ui ->O as N-~ ~ and Ii-~,-,, p;U; ->
5,.,,,. Note 5,,, is monotone increasing in the average variance of the pricing noise in the stock cross-section. Equation (19) then reduces to dr- - i, = (P~ w - 8,v )dt + Aiv6,: dF . (25) 103101 And the holding period return is JI= d~iv. (r,+Rr=u'~-Styr-O.SQi:vaJ':~.1.
E,[r,,+,.] = E,e = e . (26) 103111 Equation (25) may suggest that in a well diversified portfolio constructed from cap-weighting, the portfolio expected return may be the cap-weighted expected returns of the constituent stocks less a drag terni 5(.,,,. This return drag may occur because portfolio weights are positively correlated with prices. Stocks that are overvalued may receive added weights in the portfolio and stocks that are undervalued may receive lesser weights. The greater the mispricing in the market, the more severe may be this problem and the larger the resulting drag (.511, ) to the cap-weighted portfolio.

103121 Portfolio weights which do not depend on market capitalizations (or market prices) may be considered. The weights could be as arbitrary as random weights or as simple as equal weights.
The vector of weights may be denoted as NC = {W,,W,,...1vN } , (27) The return on the non-cap-weighted portfolio may then be dr,,= _ PUNC)dt +~3NC6,:dF+6N, dW,,,. , (28) where _ N
PA'C - i=1 wiP i = - rf + &C~ ~ (29) n' PUNC wiPiUi > (30) N
wiA> (3 1 ) A, _~;_, tiv 6. dW . (32) The non-cap-weighted portfolio drift term may be N ( f~N(' - i-, 11~iP)Ui \ = 33) Comparing equation (33) to (24), it may be found that a non-cap-weighted portfolio does not suffer a drag in expected return.

In the Iimit, 6v;.dWN(, -> 0 and pUv(, -> 0 as N-> oo. Equation (28) may then reduce to drM. = /.'Ndt + /3N(.6, dF . (34) And the holding period return may be ., ( E, [r; ~', f,''(, drec. e (35) . .;+7' ~ - 103131 Coinparing the expected cumulative holding period return for a cap-weighted portfolio and a non-cap-weighted portfolio of the same factor exposure or same 8 (the Iimiting case shown in (26) and (35)), it -nay be found that the non-cap-weighted portfolio has a higher return. In fact, in the limit, there is arbitrage as indicated by (34) and (25). Therefore, in an einbodiment it may be considered important that in the economy, N is sufficiently different from infinity and/or that the factor loading Q cannot be measured with perfect precision.

103141 In the following embodiment, return dynamics for stocks and portfolios are expressed relative to the observed cap-weighted "market" portfolio instead of the unobserved factor F. This shift in measure may lead naturally to the CAPM regression formula and predict that in the stock cross-section, the average stock will show a CAPM alpha.
103151 Rewriting equation (19), 6r= dF = I dr( iv -(Pcw - PU(:w ) di -Eciv dW( iv (36) ,6civ Acw Qcw For individual stocks, substituting into (8), dr; _ ~f~; - PiU; - (f~(:w - PUc.n, )) dt + Q dr(:W - ~ 6Cwd WCw + 6,.;dW.; .
(37) a0õ aor Additionally, a new process may be defined, the excess market return process dR,, = dr-11, -rjdt , (38) and a new variable y= Q
Qor .

Substituting into (37), the following is obtained dr = (p; -p;Ur - Yr(PciV - rt - pU(.ii,))dt +Y;dRtii -Y;6rnVdW(.I(, +6,;dW.;.
(39) Recalling equation (2), where ft, = rf equation (39) can be rewritten as dr = (rf - p;U; + y; pU(:iv) dt + y;dR, - y;6(.IydW v + 6,;dW,; (40) In the Iimiting case as N -> oo, the following may be obtained dr. _ (rr - p,U, + yi8(.Ji, ) dt + y,dR,, + 6,.,dW.; . (41) It may be noted that the average stock may be expected to show an "alpha"
equal to y;8(.,,, when its excess stock return is regressed against the excess market return.
For a non-cap-weighted portfolio, equation (28) can be expressed as drN('-(rf -pUNC'+YN(:pUClV)dt+yN(.dR, -YN(;6(:nVdW(-iy+6n,(.dWA,(.. (42) In the Iimiting case as N -* oo, di;A,(_ + yN(.8(.(r )dt + y,%,(.dR,,,, .
(43) A non-cap-weighted portfolio may be expected to show an "alpha" in a CAPM
regression.
103161 In the following embodiment, it may be shown that , in this economy, size and value exposure in a stock or portfolio can be used to predict future returns.
Specifically, small size exposure and value exposure may lead to superior stock or portfolio returns, adjusting for "market" beta. By assumption, we may be in a one risk factor economy, and size and value may not be risk factors. The observed alpha in a CAPM regression may be driven purely by the return drag in the cap-weighted inarket portfolio.
103171 Recalling from (40) that the individual stock return dynamics can be written as dr =(rr-p;U;+y;pU(.iv)dt+y;dRA,-y;o',,,dW(,w+6,.;dW;. (44) 103181 Examining equation (44), it may be seen that a larger stock would on average have a negative drift term in excess of the risk free rj. It inay be straightforward to show that a larger stock, denoted by p; > p, where p denote the capitalization of the average cornpany, will have a greater chance of receiving a positive pricing error U in the last period and therefore be more likely to underperform going forward as the positive pricing error reverts to zero.

103191 More formally, since U; is a mean zero random variable, E[U; P; > P] >
0 if the conditional probability Pr{ U; > 0 1 P> P}> Pr{ U, > 0}.

103201 Using Bayes rule of conditional probability:
Pr{P>P1 U;>0}- Pr{U;>0}
Pr{U;>O1 P,>P}= (45) Pr{P; > P}

It is clear that:

Pr{P;>P1 U,>0}>Pr{P,.>P}. (46) Substituting (46) into (45):

Pr{P>PI U;>0}- Pr{U;>0}
Pr{ > Pr U. > 0 1 P > P } _ - Pr{P; > P} { U. > 0 }, (47) which completes the proof that E[U; P, > P] > 0. This in turn may prove that size predicts next period return, EL f +A dr; I Põ > P, I < E[ r+A dr; 1.

103211 Similarly, it may be shown that, under some fairly general and reasonable assumptions on the book value process, a growth stock (as defined by above average price-to-book ratio or > H) may be more likely to have received a positive pricing error and therefore have a negative drift term in excess of the risk free rf.

103221 It may now be shown that E[U; I~; <;~] < 0 and E[U; > H] > 0.

103231 Again, it is shown that Pr{ U; > 0 1 H; > > Pr{ U; > 0} to prove that E[U;I,~-,~'; >;~]>0.

103241 First, Bayes rule gives:

Pr{ ; > H 1 U; > 0} - Pr{U; > 0}
Pr{U;>01 P,>P}= . (48) { ' '' }
Pr K,>H
The following would need to be shown:

Pr{">HI U;>0}>Pr{H;>;}. (49) A sufficient condition for this inequality to hold niay be that the book value process B is not influenced by market mispricing U; as strongly as the price process P;.
More specifically, as long as the process for -1 has a drift term that is negative in U;, the inequality may bear true.
103251 Hence, in an embodiment, if the book values of companies are not subjected to the effects of mispricings in stock prices, then E[U; H >;]> 0, which indicates that price-to-book ratio can predict next period return, E Lf+"dr I~-"'; >;~ E~~+~~ drJ
; ~.
L, 103261 The inequality in equation (49) can be extended to include more than just price-to-book ration but also price-to-dividend and price-to-earnings ratios. This further explains the empirical observations that low yielding stocks and high P/E stocks tend to underperform.
103271 Since conditional expectation may be considered linearly additive, based on the above, in another e-nbodiment it may be straight forwardly shown that any portfolio which has smaller weighted average cap than the "market" portfolio would have a positive excess drift and would show a positive CAPM alpha in a time series regression. Similarly, any portfolio which has a lowei- price-to-book ratio (lower P/E or higher yield) than the "market"
portfolio, would have a positive excess drift and show a positive CAPM alpha.

Exemp/ary Computer System Emborliments 103281 FIG. 6 depicts an exemplary computer system that may be used in impleinenting an n exemplary embodiment of the present invention. Specifically, FIG. 6 depicts an exemplary embodiment of a computer system 600 that may be used in computing devices such as, e.g., but not limited to, a client and/or a server, etc., according to an exemplary embodiment of the present invention. FIG. 6 depicts an exemplary embodiment of a computer system that may be used as client device 600, or a server device 600, etc. The present invention (or any part(s) or function(s) thereof) may be implemented using hardware, software, firmware, or a combination thereof and may be implemented in one or more computer systems or other processing systems.
In fact, in one exemplary embodiment, the invention may be directed toward one or more computer systems capable of carrying out the functionality described herein.
An example of a computer system 600 may be shown in FIG. 6, depicting an exemplary embodiment of a block diagram of an exemplary computer system useful for implementing the present invention.
Specifically, FIG. 6 illustrates an example computer 600, which in an exemplary embodiment may be, e.g., (but not limited to) a personal computer (PC) system running an operating system such as, e.g., (but not limited to) MICROSOFTOO WINDOWSOO
NT/98/2000/XP/CE/ME/VISTA, etc. available from MICROSOFTOO Corporation of Redinond, WA, U.S.A. However, the invention inay not be limited to these platforins.
Instead, the invention may be iinplemented on any appropriate computer systein running any appropriate operating system. In one exemplary embodiment, the present invention may be implemented on a computer system operating as discussed herein. An exemplary computer system, computer 600 may be shown in FIG. 6. Other components of the invention, such as, e.g., (but not Iimited to) a computing device, a communications device, mobile phone, a telephony device, a telephone, a personal digital assistant (PDA), a personal computer (PC), a handheld PC, an interactive television (iTV), a digital video recorder (DVD), client workstations, thin clients, thick clients, proxy servers, network coimnunication servers, remote access devices, client computers, server computers, routers, web servers, data, inedia, audio, video, telephony or streaming technology servers, etc., may also be implemented using a computer such as that shown in FIG. 6. Services may be provided on demand using, e.g., but not limited to, an interactive television (iTV), a video on deinand system (VOD), and via a digital video recorder (DVR), or other on demand viewing system.
103291 The computer system 600 may include one or more processors, such as, e.g., but not Iimited to, processor(s) 604. The processor(s) 604 may be connected to a communication infrastructure 606 (e.g., but not Iimited to, a communications bus, cross-over bar, or network, etc.). Various exemplary software embodiments may be described in terms of this exemplary computer system. After reading this description, it may become apparent to a person skilled in the relevant art(s) how to implement the invention using other computer systems and/or architectures.
103301 Coinputer system 600 may include a display interface 602 that may forward, e.g., but not Iimited to, graphics, text, and other data, etc., from the communication infrastructure 606 (or froin a frame buffer, etc., not shown) for display on the display unit 630.
103311 The computer system 600 may also include, e.g., but may not be Iimited to, a main inemory 608, random access memory (RAM), and a secondary memory 610, etc. The secondary inemory 610 may include, for example, (but not limited to) a hard disk drive 612 and/or a removable storage drive 614, representing a floppy diskette drive, a inagnetic tape drive, an optical disk drive, a compact disk drive CD-ROM, etc. The reinovable storage drive 614 may, e.g., but not limited to, read from and/or write to a removable storage unit 618 in a well known manner. Removable storage unit 618, also called a program storage device or a computer program product, may represent, e.g., but not Iimited to, a floppy disk, magnetic tape, optical disk, coinpact disk, etc. which may be read from and written to by removable storage drive 614.
As may be appreciated, the removable storage unit 618 may include a computer usable storage -nedium having stored therein computer software and/or data. In some embodiments, a " inachine-accessible medium" may refer to any storage device used for storing data accessible by a computer. Examples of a machine-accessible inedium may include, e.g., but not Iimited to:
a magnetic hard disk; a floppy disk; an optical disk, like a compact disk read-only memory (CD-ROM) or a digital versatile disk (DVD); a magnetic tape; and/or a memory chip, etc.
103321 In alternative exemplary embodinients, secondary meinory 610 may include other similar devices for allowing computer programs or other instructions to be loaded into computer system 600. Such devices may include, for example, a removable storage unit 622 and an interface 620. Examples of such may include a program cartridge and cartridge interface (such as, e.g., but not Iimited to, those found in video game devices), a removable memory chip (such as, e.g., but not Iimited to, an erasable programmable read only memory (EPROM), or programmable read only memory (PROM) and associated socket, and other removable storage units 622 and interfaces 620, which may allow software and data to be transferred from the removable storage unit 622 to computer system 600.
103331 Computer 600 may also include an input device 616 such as, e.g., (but not Iimited to) a mouse or other pointing device such as a digitizer, and a keyboard or other data entry device (not shown).
103341 Computer 600 may also include output devices, such as, e.g., (but not limited to) display 630, and display interface 602. Coinputer 600 may include input/output (I/O) devices such as, e.g., (but not limited to) communications interface 624, cable 628 and communications path 626, etc. These devices may include, e.g., but not limited to, a network interface card, and modeins (neither are labeled). Communications interface 624 may allow software and data to be transferred between computer system 600 and external devices.
103351 In this document, the terms "computer program medium" and "computer readable medium" may be used to generally refer to media such as, e.g., but not limited to removable storage drive 614, a hard disk installed in hard disk drive 612, and signals 628, etc. These computer program products inay provide software to computer system 600. The invention inay be directed to such computer program products.
103361 References to "one embodiment," "an embodiment," "esample embodiinent,"
"various embodiments," etc., may indicate that the einbodiment(s) of the invention so described may include a particular feature, structure, or characteristic, but not every embodiment necessarily includes the particular feature, structure, or characteristic.
Further, repeated use of the phrase "in one embodiment," or "in an ezemplary embodiment," do not necessarily refer to the same embodiment, although they may.
103371 In the following description and claiins, the terms "coupled" and "connected," along with their derivatives, may be used. It should be understood that these terms may be not intended as synonyms for each other. Rather, in particular embodiments, "connected" may be used to indicate that two or more elements are in direct physical or electrical contact with each other. "Coupled" may mean that two or more eleinents are in direct physical or electrical contact. However, "coupled" may also mean that two or more elements are not in direct contact with each other, but yet still co-operate or interact with each other.
103381 An algorithm may be here, and generally, considered to be a self-consistent sequence of acts or operations leading to a desired result. These include physical manipulations of physical quantities. Usually, though not necessarily, these quantities take the form of electrical or magnetic signals capable of being stored, transferred, combined, compared, and otherwise manipulated. It has proven convenient at times, principally for reasons of common usage, to refer to these signals as bits, values, elements, symbols, characters, terms, numbers or the like.
It should be understood, however, that all of these and similar terms are to be associated with the appropriate physical quantities and are merely convenient labels applied to these quantities.
103391 Unless specifically stated otherwise, as apparent from the following discussions, it may be appreciated that throughout the specification discussions utilizing terms such as "processing," "computing," "calculating," "determining," or the like, refer to the action and/or processes of a computer or computing system, or similar electronic computing device, that inanipulate and/or transform data represented as physical, such as electronic, quantities within the computing system's registers and/or memories into other data similarly represented as physical quantities within the computing system's memories, registers or other such information storage, transinission or display devices.

103401 In a similar manner, the term "processor" may refer to any device or portion of a device that processes electronic data from i-egisters and/or memory to transform that electronic data into other electronic data that may be stored in registers and/or memory.
A "computing platform" may comprise one or more processors.
103411 Embodiments of the present invention may include apparatuses for performing the operations herein. An apparatus may be specially constructed for the desired purposes, or it inay co-nprise a general purpose device selectively activated or reconfigured by a program stored in the device.
103421 In yet another exemplary embodiment, the invention may be implemented using a combination of any of, e.g., but not limited to, hardware, firmware and software, etc.
103431 In one or more embodiments, the present embodiments are embodied in machine-executable instructions. The instructions can be used to cause a processing device, for example a general-purpose or special-purpose processor, which is programmed with the instructions, to perform the steps of the present invention. Alternatively, the steps of the present invention can be performed by specific hardware components that contain hardwired logic for performing the steps, or by any combination of programmed computer components and custom hardware components. For example, the present invention can be provided as a computer program product, as outlined above. In this environment, the embodiments can include a machine-readable medium having instructions stored on it. The instructions can be used to program any processor or processors (or other electronic devices) to perform a process or method according to the present exemplary embodiments. In addition, the present invention can also be downloaded and stored on a computer program product. Here, the program can be transferred from a reinote computer (e.g., a server) to a requesting computer (e.g., a client) by way of data signals embodied in a carrier wave or other propagation medium via a communication link (e.g., a-nodem or network connection) and ultimately such signals may be stored on the computer systems for subsequent execution).

Exemplary Communications Embodiments 103441 In one or more embodiments, the present embodiments are practiced in the environment of a computer network or networks. The network can include a private network, or a public network (for example the Internet, as described below), or a combination of both. The network includes hardware, software, or a combination of both.

103451 From a telecommunications-oriented view, the network can be described as a set of hardware nodes interconnected by a communications facility, with one or more processes (hardware, software, or a combination thereof) functioning at each such node.
The processes can inter-conimunicate and exchange information with one another via communication pathways between them called interprocess communication pathways.
103461 On these pathways, appropriate communications protocols are used. The distinction between hardware and software may not be easily defined, with the same or similar functions capable of being preformed with use of either, or alternatives.
103471 An exemplary computer and/or telecoinmunications network environment in accordance with the present embodiments niay include node, which include inay hardware, software, or a combination of hardware and software. The nodes may be interconnected via a communications network. Each node may include one or more processes, executable by processors incorporated into the nodes. A single process may be run by multiple processors, or multiple processes may be run by a single processor, for example.
Additionally, each of the nodes -nay provide an interface point between network and the outside world, and may incorporate a collection of sub-networks.
103481 As used herein, "software" processes may include, for example, software and/or hardware entities that perform work over time, such as tasks, threads, and intelligent agents.
Also, each process may refer to multiple processes, for carrying out instructions in sequence or in parallel, continuously or intermittently.
103491 In an exemplary embodiment, the processes may communicate with one another through interprocess cominunication pathways (not labeled) supporting communication through any communications protocol. The pathways may function in sequence or in parallel, continuously or intermittently. The pathways can use any of the communications standards, protocols or technologies, described herein with respect to a communications network, in addition to standard parallel instruction sets used by many computers.
103501 The nodes inay include any entities capable of performing processing functions.
Examples of such nodes that can be used with the embodiments include computers (such as personal computers, workstations, servers, or mainframes), handheld wireless devices and wireline devices (such as personal digital assistants (PDAs), modem cell phones with processing capability, wireless e-mail devices including BlackBerry Tm devices), document processing devices (such as scanners, printers, facsimile machines, or multifunction document machines), or complex entities (such as local-area networks or wide area networks) to which are connected a collection of processors, as described. For example, in the context of the present invention, a node itself can be a wide-area network (WAN), a local-area network (LAN), a private network (such as a Virtual Private Network (VPN)), or collection of networks.
103511 Communications between the nodes may be made possible by a communications network. A node may be connected either continuously or intermittently with communications network. As an example, in the context of the present invention, a communications network can be a digital communications infrastructure providing adequate bandwidth and information security.
103521 The communications network can include wireline communications capability, wireless cominunications capability, or a combination of both, at any frequencies, using any type of standard, protocol or technology. In addition, in the present einbodiments, the communications network can be a private network (for example, a VPN) or a public network (for example, the Internet).
103531 A non-inclusive list of exemplary wireless protocols and technologies used by a communications network may include BlueTooth"~", general packet radio service (GPRS), cellular digital packet data (CDPD), niobile solutions platforni (MSP), multimedia messaging (MMS), wireless application protocol (WAP), code division multiple access (CDMA), short message service (SMS), wireless markup language (WML), handheld device -narkup language (HDML), binary runtime environment for wireless (BREW), radio access network (RAN), and packet switched core networks (PS-CN). Also included are various generation wireless technologies. An exemplary non-inclusive list of primarily wireline protocols and technologies used by a communications network includes asynchronous transfer mode (ATM), enhanced interior gateway routing protocol (EIGRP), frame relay (FR), high-level data link control (HDLC), Internet control message protocol (ICMP), interior gateway routing protocol (IGRP), internetwork packet exchange (IPX), ISDN, point-to-point protocol (PPP), transmission control protocol/internet protocol (TCP/IP), routing information protocol (RIP) and user datagram protocol (UDP). As skilled persons will recognize, any other known or anticipated wireless or wireline protocols and technologies can be used.
103541 The embodiments may be employed across different generations of wireless devices.
This includes 1 G-5G according to present paradigms. I G refers to the first generation wide area wireless (WWAN) communications systems, dated in the 1970s and 1980s. These devices are analog, designed for voice transfer and circuit- switched, and include AMPS, NMT and TACS.
2G refers to second generation communications, dated in the 1990s, characterized as digital, capable of voice and data transfer, and include HSCSD, GSM, CDMA 1S-95-A and D-AMPS
(TDMA/IS-136). 2.5G refers to the generation of communications between 2G and 3 G. 3G
refers to third generation communications systems recently coming into existence, characterized, for example, by data rates of 144 Kbps to over 2 Mbps (high speed), being packet-switched, and permitting multimedia content, including GPRS, IxRTT, EDGE, HDR, W-CDMA. 4G
refers to fourth generation and provides an end-to-end IP solution where voice, data and streamed multimedia can be served to users on an "anytime, anywhere" basis at higher data rates than previous generations, and will likely include a fully IP-based and integration of systems and network of networks achieved after convergence of wired and wireless networks, including coinputer, consumer electronics and communications, for providing 100 Mbit/s and I Gbit/s communications, with end-to-end quality of service and high security, including providing services anytime, anywhere, at affordable cost and one billing. 5G refers to fifth generation and provides a complete version to enable the true World Wide Wireless Web (WWWW), i.e., either Semantic Web or Web 3.0, for example. Advanced technologies may include intelligent antenna, radio frequency agileness and flexible modulation are required to optimize ad-hoc wireless networks.
103551 As noted, each node 102-108 includes one or more processes 112, 114, executable by processors 110 incorporated into the nodes. In a number of embodiments, the set of processes 112, 114, separately or individually, can represent entities in the real world, defined by the purpose for which the invention is used.
103561 Furthermore, the processes and processors need not be located at the same physical locations. In other words, each processor can be executed at one or more geographically distant processor, over for example, a LAN or WAN connection. A great range of possibilities for practicing the embodiments may be employed, using different networking hardware and software configurations from the ones above mentioned.
103571 FIG. 7 depicts an exemplary embodiment of a chart 700 graphing cumulative returns by date for exemplary high yield debt instrument metrics according to an exemplary embodiment. FIG. 8 depicts block diagram 800 of an exemplary system according to an exemplary embodiment. The system may include an entity database 802 that, according to an exemplary embodiment, may store aggregated accounting based data and/or other data, metrics, measures, parameters, technical parameters, characteristics and/or factors about a plurality of entities, obtained from an external data source 804. Each database 802 entity may have at least one object type associated with the entity. The aggregated accounting based data may include, according to an exemplary embodiment, at least one non-inarket capitalization, non-price related objective measure of scale and/or size metric associated with each entity. The system may include an analysis host computer processing apparatus 102 coupled to the entity database 802. The analysis host computer processing apparatus 102 inay include a data retrieval and storage subsystem 806, according to an exemplary embodiment, which may retrieve the aggregated accounting based data from the entity database and may store the aggregated accounting based data to the entity database 802. The analysis host computer processing apparatus 102 may include, according to an exemplary embodiment, an index generation subsystem 808, which may include, according to an exemplary embodiment, a selection subsystem 810 operative to select a group of the entities based on at least one non-market capitalization objective measure of scale or size metric including one or more technical parameters and/or metrics; a weighting function generation subsystem 812, according to an exemplary embodiment, may be operative to generate a weighting function based on at least one non-market capitalization, non-price related objective measure of scale and/or size metric; an exemplary index creation subsystein 814, according to an exeinplary embodiment, may be operative to create a non-market capitalization non-price objective measure of scale and/or size index based on the group of selected entities and/or the weighting function;
and/or a storing subsystem 816, according to an exemplary embodiment, operative to store the non-market capitalization, non-price related objective measure of scale and/or size based index, and/or multi-dimensional array of data objects. The index or array of data objects may be stored on a storage device, in one exemplary einbodiment.
103581 According to one exemplary embodiment, the system 800 may further include a normalization calculation and/or computation subsystem 818, operative to normalize entity object data to be stored in the entity database 802.
103591 According to another exemplary embodiment, the system 800 may further include a trading host computer system 104 which may include, according to an exemplary embodiment, an index retrieval subsystem 820 operative to retrieve and/or store an instance of the non-market capitalization, non-price related objective measure of scale and/or size based index, and/or multi-dimensional array of data objects from a storage device; a trading accounts management subsystem 822 operative to manage accounts data relating to a plurality of accounts including positions data, position owner data, and position size data, any data of which may be stored in trading accounts database 108; and/or a purchasing subsystem 824 operative to purchase from an exchange host system 112 one or inore positions for the position owner, according to the index and/or array of data objects.
Evemplary Process Control System 103601 According to an exemplary e-nbodiment, the system 800 may be used to compute using data objects input via an input/output subsystem, a multi-dimensional array storing database system for storage of a multi-dimensional array computed via a multi-dimensional object array creation subsystem comprising a selection subsystem operative to select one or more objects based on one or more technical parameters, and a weighting subsystem operative to weight the selected one or more objects based on one or more technical parameters, wherein the technical para-neters are chosen such that the technical parameters avoid influence of an undesirable predetermined technical criterion and/or criteria, so as to avoid influence of the undesirable predetermined technical criterion and/or criteria. As a result of elimination of the undesirable predeterinined technical criterion and/or criteria, the multi-dimensional array selected and/or weighted to avoid influence of the undesirable predetermined technical criterion and/or criteria may as a result perform processing from negative effects from the undesirable predetermined technical criterion and/or criteria. An exemplary einbodiment of the selection subsystem may be operative to select objects from a predetermined universe of objects to obtain a subset of the universe, where the selection is based on a technical parameter that is not influenced by the undesirable technical criterion and/or criteria. Following execution of the selection subsystem, according to an exemplary embodiment, an exemplary weighting subsystem may operative to weight the resulting selected objects by a weighted combination of two or more technical weighting criteria, which are not influenced by the undesirable technical criterion and/or criteria. The process may be used for such technical processes as may include, e.g. but are not liinited to, industrial automation, production process automation, a manufacturing process, and/or a chemical processing system, among others as described elsewhere, herein.
103611 According to one exemplary embodiment, the weighting subsystem may further compute an algorithinically computed summation of a plurality of weighting factors, the plurality of weighting factors including a first of the plurality of weighting factors, where the first includes a first given computational product of a first object value and a first technical parameter value associated with the first object value, and a second of the plurality of weighting factors, where the second includes a second given computational product of a second object value and a second technical parameter value associated with the second object value, and/or any additional of the plurality of weighting factors, where the any additional includes an additional given computational product of an additional object value and an additional technical parameter value associated with the additional object value.
103621 FIG. 9 depicts an exemplary embodiment of a chart 900 graphing cumulative returns by date for exemplary einerging market debt instrument metrics according to an exemplary einbodiment.
103631 FIG. 10 depicts an exeinplary embodiment of a chart 1000 graphing cumulative returns by date for exemplary emerging market debt instrument metrics illustrating growth of an exemplary investment, according to an exemplary embodiment.
103641 FIG. I I depicts an exemplary embodiment of a chart 1 100 graphing a rolling 36-month value added composite exemplary emerging market debt instrument metrics vs. cap-weighted emerging market bonds, according to an exemplary einbodiment.

103651 While various embodiments of the present invention have been described above, it should be understood that they have been presented by way of example only, and not limitation.
Thus, the breadth and scope of the present invention should not be limited by any of the above-described exemplary embodiments, but should instead be defined only in accordance with the following claims and their equivalents.

Claims (152)

1. A method, executed on a data processing system, comprising:
creating an accounting data based index (ADBI) based on accounting data including:
selecting a universe of financial objects, selecting a subset of said financial objects of said universe based on at least one of said accounting data, and weighting said subset of said universe according to at least one of said accounting data to obtain the ADBI; and creating a portfolio of financial objects using the ADBI, including said subset of selected and weighted financial objects.

2. The method according to claim 1, wherein said universe comprises at least one of:
a sector;
a market;
a market sector;
an industry sector;
a geographic sector;
an international sector;
a sub-industry sector;
a government issue; and/or a tax exempt financial object;
agriculture, forestry, fishing and/or hunting industry sector;
mining industry sector;
utilities industry sector;
construction industry sector;
manufacturing industry sector;
wholesale trade industry sector;
retail trade industry sector;
transportation and/or warehousing industry sector;
information industry sector;
finance and/or insurance industry sector;

real estate and/or rental and/or leasing industry sector;
professional, scientific, and/or technical services industry sector;
management of companies and/or enterprises industry sector;
administrative and/or support and/or waste management and/or remediation services industry sector;
education services industry sector;
health care and/or social assistance industry sector;
arts, entertainment, and/or recreation industry sector;
accommodation and/or food services industry sector;
other services (except public administration) industry sector; and/or public administration industry sector.

3. The method according to claim 1, wherein said accounting based data used in weighting as a measure of value of the company associated with the financial object, comprises at least one of:
dividends, if any;
revenue;
cash flow;
book value;
collateral;
assets;
distributions;
funds from operations;
adjusted funds from operations;
earnings;
income;
liquidity;
country metrics including at least one of: economic metrics, area, population, unemployment rate, reserves, resource consumption, democracy index, corruption index, government debt, private debt, government expenditures, nominal interest rate, commercial paper yield, consumer price index (CPI), purchasing power, relation of purchasing power to nominal exchange rate and any deviations from historical trend, and/or country current account flow;
said economic metrics including at least one of: a gross domestic product (GDP), a gross national product (GNP), a gross net income (GNI), and/or a gross national debt (GND);
industry metrics including at least one of: industry growth rate, total capital expenditures, inventories total - end of year, average industry dividends, supplemental labor costs, inventories finished products - end of year, new orders for manufactured goods, fuel costs, inventories work in process - end of year, shipments, electric energy used, inventories, materials, supplies, fuels, etc. - end of year, unfilled orders, inventories by stage of fabrication, value of manufacturers inventories by stage of fabrication - beginning of year, Inventories Number of production workers, inventories total - beginning of year, inventories-to-shipments ratio, payroll of production workers, inventories finished products -beginning of year, value of product shipments, hours of production workers, inventories work in process -beginning of year, statistics from department of commerce, industry associations, for industry groups and industries , cost of purchased fuels and electric energy, inventories, materials, supplies, fuels, - beginning of year, geographic area statistics, electric energy quantity purchased, value of shipments - total, annual survey of manufacturers (ASM), electric energy cost, value of shipments - products, employment, electric energy generated, value of shipments - total miscellaneous receipts, all employees payroll, electric energy sold and/or transferred, total miscellaneous receipts - value of resales, all employees hours , cost of purchased fuels, total miscellaneous receipts - contract receipts, all employees total, compensation, capital expenditure for plant and/or equipment total, other total miscellaneous receipts, all employees total fringe benefit costs, capital expenditure for plant and/or equipment -buildings and/or other structures, interplant transfers, total cost of materials, capital expenditure for plant and equipment - machinery and/or equipment total, costs of materials - total, payroll, capital expenditure for plant and equipment - autos, trucks, etc for highway use, costs of materials -materials, parts, containers, packaging, value added by manufacture, capital expenditure for plant and equipment - computers, peripheral data processing equipment, costs of materials -resales, cost of materials consumed, capital expenditure for plant and equipment - all other expenditures, costs of materials - purchased fuels, value of shipments, value of manufacturers inventories by stage of fabrication - end of year, costs of materials -purchased electricity, costs of materials - contract work, industry cost of capital, and/or average industry dividend;

employees;
margin;
profit margin;
term structure;
interest rate;
seasonal factor;
a financial ratio of a company;
a ratio of accounting based data;
a ratio of accounting based data per share;
a ratio of a first accounting based data to a second accounting based data;
a liquidity ratio;
a working capital ratio;
a current ratio;
a quick ratio;
a cash ratio;
an asset turnover ratio;
a receivables turnover ratio;
an average collection period ratio;
an average collection period ratio;
an inventory turnover ratio;
an inventory period ratio;
a leverage ratio;
a debt ratio;
a debt-to-equity ratio;
an interest coverage ratio;
a profitability ratio;
a return on common equity (ROCE) ratio;
profit margin ratio;
an earnings per share (EPS) ratio;
a gross profit margin ratio;
a return on assets ratio;
a return on equity ratio;

a dividend policy ratio;
a dividend yield ratio;
a payout ratio;
a capital market analysis ratio;
a price to earnings (PE) ratio; and/or a market to book ratio.

4. The method according to claim 3, wherein said accounting based data are weighted relatively dependent on the geography of the company associated with the financial object.

5. The method of claim 1, wherein said financial object comprises:
at least one unit of interest in at least one of:
an asset;
a liability;
a tracking portfolio;
a financial instrument and/or a security, wherein said financial instrument and/or said security denotes a debt, an equity interest, and/or a hybrid;
a derivatives contract, including at least one of:
a future, a forward, a put, a call, an option, a swap, and/or any other transaction relating to a fluctuation of an underlying asset, notwithstanding the prevailing value of the contract, and notwithstanding whether such contract, for purposes of accounting, is considered an asset or liability;
a commodity;
a financial position;
a currency position;
a trust, a real estate investment trust (REIT), a real estate operating company (REOC), and/or a portfolio of trusts;
a debt instrument comprising at least one of: a bond, a debenture, a subordinated debenture, a mortgage bond, a collateral trust bond, a convertible bond, an income bond, a guaranteed bond, a serial bond, a deep discount bond, a zero coupon bond, a variable rate bond, a deferred interest bond, a commercial paper, a government security, a certificate of deposit, a Eurobond, a corporate bond, an investment grade corporate bond, a government bond, a municipal bond, a treasury-bill, a treasury bond, a foreign bond, an emerging market bond, a high yield bond, a developed market bond, a junk bond, a collateralized instrument, an exchange traded note (ETN), and/or other agreements between a borrower and a lender;
a fund; and/or an investment entity or account of any kind, including an interest in, or rights relating to:
a hedge fund, an exchange traded fund (ETF), a fund of funds, a mutual fund, a closed end fund, an investment vehicle, and/or any other pooled and/or separately managed investments.

6. A computer-implemented method for constructing at least one of a high-yield debt instruments index and/or a portfolio of high-yield debt instruments based on the high yield debt instruments index, the method comprising:

selecting constituent high-yield debt instruments of said high-yield debt instruments index based upon at least one metric regarding the companies associated with said high-yield debt instruments, wherein said at least one metric comprises at least one of sales, book value, cash flow, dividends if any, collateral, a composite of the other metrics, and/or ratios pertaining thereto; and weighting said constituent high-yield debt instruments based upon at least one metric regarding the size of the companies associated with said high-yield debt instruments to obtain constituent weightings for each respective constituent high-yield debt instrument, wherein said at least one metric comprises at least one of sales, book value, cash flow, dividends if any, collateral, a composite of the other metrics, and/or ratios pertaining thereto.

7. The computer-implemented method of claim 6, wherein said weighting is substantially exclusive of an influence of price of the companies.

8. The computer-implemented method of claim 6, wherein said weighting is not based on any of equal weighting, weighting in proportion to price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

9. The computer-implemented method of claim 6, wherein said at least one metric comprises data found within a generally accepted accounting principles (GAAP) company annual report and accounts (GAAP reports).

10. The computer-implemented method of claim 6, further comprising basing the constituent weightings of the high-yield debt instruments upon at least one of a ratio or a manipulation of the accounting data.

11. The computer-implemented method of claim 10, wherein the basing the constituent weightings upon at least one of a ratio or a manipulation of the accounting data comprises basing the constituent weightings on at least one of: a relative size of the return on assets of said selected companies, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof, wherein said return is determined based on cash flow.

12. The computer-implemented method of claim 6, wherein the constituent weightings of the high-yield debt instruments within the high-yield debt instruments index or high yield debt instruments fund are altered as the accounting data concerning the companies in or outside the index changes.

13. The computer-implemented method of claim 12, wherein the constituent weightings of the high-yield debt instruments within the fund are altered when at least one of:
one or more of said companies report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of said companies in the index have reported their quarterly and/or annual accounting data.

14. The computer-implemented method of claim 6, wherein said weighting comprises calculating said constituent weightings based upon said at least one accounting data.

15. The computer-implemented method of claim 14, wherein said calculating is performed by an index manager calculator.

16. A computer-implemented method for constructing at least one of an emerging markets financial objects index and/or an emerging markets financial objects portfolio of emerging market financial objects based on the emerging markets financial objects index, the method comprising:

selecting constituent emerging market financial objects of said emerging markets financial objects index based upon at least one accounting data regarding a company relating to said emerging market financial object and/or demographic data regarding the region, country, and/or sovereign associated with said emerging market financial object; and weighting said constituent emerging market financial objects based upon at least one accounting and/or demographic data regarding the region, country and/or sovereign associated with said emerging market financial objects to obtain constituent weightings for each respective constituent emerging market financial object, wherein said emerging market financial object comprises at least one of an emerging market debt instrument and/or an emerging market equity instrument, and wherein said at least one accounting data and/or demographic data comprises at least one of a demographic measure, a population level, an area, a geographic area, an economic factor, a gross domestic product (GDP), GDP growth, a natural resource characteristic, an energy metric, a petroleum characteristic, a resource consumption metric, a petroleum consumption amount, a liquid natural gas (LNG) characteristic, a liquefied petroleum gas (LPG) characteristic, an expenditures characteristic, gross national income (GN1), a debt characteristic, a rate of inflation, a rate of unemployment, a reserves level, a population characteristic, a corruption characteristic, a democracy characteristic, a social metric, a political metric, a per capita ratio of any of the foregoing or any other characteristic, a derivative of any foregoing or any other characteristic and/or a ratio of two of the foregoing or any other characteristics.

17. The computer-implemented method of claim 16, wherein said weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

18. The computer-implemented method of claim 16, wherein the demographic data includes data found within a database of information pertaining to at least one of regions, sovereigns and/or countries.

19. The computer-implemented method of claim 16, further comprising basing the constituent weightings of the emerging market financial objects upon at least one of a ratio or a manipulation of the accounting and/or demographic data.

20. The computer-implemented method of claim 16, wherein the constituent weightings of the emerging market financial objects within the emerging markets financial objects index and/or emerging markets financial objects portfolio are altered as the accounting data and/or demographic data concerning the regions, countries and/or sovereigns in or outside the index changes.

21. The computer-implemented method of claim 16, wherein said weighting comprises calculating said constituent weightings based upon said at least one accounting data and/or demographic data.

22. A computer-implemented method for constructing at least one of a Real Estate Investment Trust (REIT) and/or Real Estate Operating Company (REOC) index or a REIT
and/or REOC
fund comprising a portfolio of REITs and/or REOCs based on the REIT and/or REOC index, the method comprising:

selecting constituent REITs and/or REOCs for said REIT and/or REOC index based upon at least one data metric of REIT and/or REOC size, wherein said data metric comprises at least one of revenues, adjusted funds from operations (AFFO), funds from operations (FFO), distributions, dividends, and/or assets; and weighting said constituent REITs based upon at least one data metric of REIT
and/or REOC size, wherein said data metric comprises at least one of revenues, adjusted funds from operations (AFFO), funds from operations (FFO), distributions, dividends, and/or assets, to obtain constituent weightings for each respective constituent REIT and/or REOC.

23. The computer-implemented method of claim 22, wherein said weighting is substantially exclusive of an influence of REIT and/or REOC price.

24. The computer-implemented method of claim 22, wherein said weighting is not based on any of equal weighting, weighting in proportion to REIT and/or REOC price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

25. The computer-implemented method of claim 22, wherein said at least one accounting data comprises at least one of total assets, funds from operations (FFO), adjusted funds from operations (AFFO), revenues, total dividend distributions, and/or ratios pertaining thereto.

26. The computer-implemented method of claim 25, wherein the accounting data includes data found within a. generally accepted accounting principles (GAAP) company annual report and accounts (GAAP reports).

27. The computer-implemented method of claim 22, further comprising basing the constituent weightings of the REITs upon at least one of a ratio or a manipulation of the accounting data.

28. The computer-implemented method of claim 27, wherein the basing the constituent weightings upon at least one of a ratio or a manipulation of the accounting data comprises basing the constituent weightings on at least one of: a relative size of the return on assets of said selected companies, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof, wherein said return is determined based on at least one of funds from operations (FFO) or adjusted funds from operations (AFFO).

29. The computer-implemented method of claim 22, wherein the constituent weightings of the REITs within the REIT index or REIT fund are altered as the accounting data concerning the companies in or outside the index changes.

30. The computer-implemented method of claim 29, wherein the constituent weightings of the REITs within the fund are altered when at least one of: one or more of said companies report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of said companies in the index have reported their quarterly and/or annual accounting data.

31. The computer-implemented method of claim 22, wherein said weighting comprises calculating said constituent weightings based upon said at least one accounting data.

32. The computer-implemented method of claim 3 1, wherein said calculating is performed by an index manager computer system.

33. A computer-implemented method for constructing at least one of a currency instrument index and/or a currency instrument portfolio of currency and/or related foreign exchange (FX) instruments based on the currency instrument index, the method comprising:

selecting constituent currencies and/or FX instruments of said currency index based upon at least one accounting and/or demographic data regarding at least one of the regions, countries, and/or sovereigns associated with said currencies and/or FX
instruments; and weighting said constituent currencies and/or FX instruments based upon at least one accounting and/or demographic data regarding at least one of the regions, countries and/or sovereigns associated with said currencies and/or FX instruments to obtain constituent weightings for each respective constituent currency and/or FX instrument.

34. The computer-implemented method of claim 33, wherein said weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

35. The computer-implemented method of claim 33, wherein said at least one accounting or demographic data comprises at least one of a demographic measure; a population level; an area;
a geographic area; an economic factor; a gross domestic product (GDP); GDP
growth; a natural resource characteristic; a petroleum characteristic; a resource consumption metric; a petroleum consumption amount; a liquid natural gas (LNG) characteristic; a liquefied petroleum gas (LPG) characteristic; an expenditures characteristic; gross national income (GN1); a debt characteristic;
a rate of inflation; a rate of unemployment; a reserves level; a population characteristic; a corruption characteristic; a democracy characteristic; a social metric; a political metric; nominal interest rates and the ratios of nominal interest rates between issuing sovereign entities;

commercial paper yield metric; credit rating metric; consumer price index (CPI); purchasing power of local currency metric; metrics measuring relations between the purchasing power of local currency metric and nominal exchange rates and deviations from historical trends in such metrics; government exchange rate regime;.a per capita ratio of any of the foregoing or any other characteristic; a derivative of any foregoing or any other characteristic and/or a ratio of two of the foregoing or any other characteristics.

36. The computer-implemented method of claim 35, wherein the demographic data includes data found within a database of information pertaining to regions, sovereigns and/or countries.

37. The computer-implemented method of claim 33, further comprising basing the constituent weightings of the currency and related FX instruments upon at least one of a ratio or a manipulation of the accounting data.

38. The computer-implemented method of claim 33, wherein the constituent weightings of the currency and related FX instruments within the currency index or currency fund are altered as the demographic data concerning the regions, countries, or sovereigns associated with currency or related debt instruments in or outside the index changes.

39. The computer-implemented method of claim 38, wherein the constituent weightings of the currency and related FX instruments within the FX fund are altered when at least one of: one or more of said regions, countries or sovereigns report their quarterly and/or annual accounting or demographic information; and/or at a pre-determined time after which the majority of said regions, countries, or sovereigns in the index have reported their quarterly and/or annual accounting or demographic data.

40. The computer-implemented method of claim 33, wherein said weighting comprises calculating said constituent weightings based upon said at least one accounting data.

41. The computer-implemented method of claim 33, wherein said calculating is performed by an index manager calculator.

42. A computer-implemented method for constructing at least one of a commodities index and/or a commodities portfolio of commodities and/or derivative instruments based on the commodities index, the method comprising:

selecting constituent commodities and/or derivative instruments of the commodities index based upon at least one accounting data regarding the companies or industries associated with said commodities; and weighting said constituent commodities and/or derivative instruments based upon at least one accounting data regarding the companies and/or industries associated with production and consumption of the commodities to obtain constituent weightings for each respective commodity and/or derivative instrument.

43. The computer-implemented method of claim 42, wherein said weighting is substantially exclusive of an influence of share price of the companies or industries.

44. The computer-implemented method of claim 42, wherein said weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

45. The computer-implemented method of claim 42, wherein said at least one accounting data comprises at least one of sales, book value, cash-flow, any dividends, total assets, revenue, number of employees, profit margins, and/or collateral, and/or ratios pertaining thereto of the companies or industries responsible for the production and consumption of a commodity, total per unit cost of production of the commodity, the commodity reserves value, term structure of the commodity's futures, momentum in price of the commodity, and any seasonal factors that affect the valuation of the commodity.

46. The computer-implemented method of claim 45, wherein the accounting data includes data found within a generally accepted accounting principles (GAAP) company annual report and accounts (GAAP reports).

47. The computer-implemented method of claim 42, further comprising basing the constituent weightings of the commodities and related derivative instruments upon at least one of a ratio or a manipulation of the accounting data.

48. The computer-implemented method of claim 47, wherein the basing the constituent weightings upon at least one of a ratio or a manipulation of the accounting data comprises basing the constituent weightings on at least one of: a relative size of the return on assets of said companies or industries responsible for producing and consuming selected commodities, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof, wherein said return is determined based on cash flow.

49. The computer-implemented method of claim 42, wherein the constituent weightings of the commodities and related derivative instruments within the commodities index or commodities fund are altered as the accounting data concerning the companies or industries responsible for producing and consuming the commodities in or outside the index changes.

50. The computer-implemented method of claim 49, wherein the constituent weightings of the commodities and related derivative instruments within the fund are altered when at least one of:
one or more of said companies or industries report their quarterly and/or annual accounting information; and/or at a pre-determined time after which the majority of said companies or industries responsible for producing and consuming the commodities in the index have reported their quarterly and/or annual accounting data.

51. The computer-implemented method of claim 42, wherein said weighting comprises calculating said constituent weightings based upon said at least one accounting data.

52. The computer-implemented method of claim 51, wherein said calculating is performed by an index manager calculator.

53. A computer-implemented method for the construction and management of a financial object index and/or a financial object market index fund containing a portfolio of fixed income financial objects based on the financial object market index, the method comprising:
creating a fixed income financial object market index, and/or at least one fixed income financial object market index fund including a portfolio of financial objects, wherein said creating comprises:
selecting constituent financial object of the financial object market index based upon at least one accounting data about the entities associated with the financial object, wherein said selecting is exclusive of a material influence of price, and weighting the constituent financial object of the financial object market index to obtain constituent weightings based upon at least one accounting data regarding the entities associated with the financial objects, wherein said weighting is exclusive of a material influence of price of the financial object associated with the entity, and wherein said weighting is not based on any of equal weighting, weighting in proportion to share price of the stocks of the companies, weighting in proportion to market capitalization of the entities associated with the financial object, and/or weighting in proportion to free float.

54. The computer-implemented method of claim 53, further comprising basing the constituent weightings of the financial object upon at least one of: a ratio and/or a manipulation of the accounting data.

55. The computer-implemented method of claim 53, wherein the constituent weightings of the financial object within the financial object market index fund are altered as the accounting data concerning the companies in or outside the index changes.

56. The computer-implemented method of claim 55, wherein the constituent weightings of the financial object within the financial object fund are altered when at least one of: one or more of said companies report their quarterly and/or annual accounting information;
and/or at a pre-determined time after which the majority of said companies in the index have reported their quarterly and/or annual accounting data.

57. The computer-implemented method of claim 53, wherein the accounting data includes data found within a generally accepted accounting principles (GAAP) company annual report and accounts (GAAP reports).

58. The computer-implemented method of claim 53, wherein the accounting data includes at least one of: relative size of profit of a company, and/or pre-exceptional profits, sales, assets, cash flow, shareholders' equity, and/or a return on investment of said entity.

59. The computer-implemented method of claim 53, wherein the accounting data comprise:
a weighted combination of sales, cash flow, and any other generally accepted accounting data.

60. The computer-implemented method of claim 59, wherein said data comprises at least one of any dividends, profit, assets and/or ratios pertaining thereto.

61. The computer-implemented method of claim 53, wherein the accounting data comprises at least one of any dividends, profit, assets, and any fundamental accounting item, and/or ratio pertaining thereto.

62. The computer-implemented method of claim 54, wherein the basing the constituent weightings upon at least one of a ratio and/or a manipulation of the accounting data comprises basing the constituent weightings on at least one of: a relative size of the return on assets of said selected companies, the return on investment thereof, and/or the return on capital thereof compared to the cost of capital thereof.

63. The computer-implemented method of claim 53, wherein said creating comprises calculating said constituent weightings based upon said at least one accounting data.

64. The computer-implemented method of claim 63, wherein said calculating is performed by an index manager calculator.

65. A computer-implemented system for construction and management of a fixed income financial index and a portfolio of fixed income securities based on the fixed income financial index, wherein the fixed income financial index is generated based on accounting data, the system comprising:
an index construction manager configured to create the fixed income financial index, and at least one portfolio based on the fixed income financial index, wherein constituent weightings of constituents of said portfolio are based upon at least one accounting data regarding a company associated with each of the constituents of said financial portfolio, the selection of the constituents of the fixed income financial index based upon at least one accounting data about the companies exclusive of a material influence of share price, and wherein the constituent weightings are exclusive of a material influence of share price of the companies and wherein the constituent weightings are not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

66. The system of claim 65, wherein said accounting based data comprises at least one of:
dividends and/or ratios related thereto.

67. A computer readable medium embodying program logic which when executed by a computer performs a method comprising:
creating a fixed income financial index of fixed income securities, and at least one portfolio based on said fixed income financial index, wherein constituent weightings of constituents of said portfolio are based upon at least one accounting data regarding a company associated with each of the constituents of said portfolio, said creating comprising:
selecting constituents of said fixed income financial index based upon at least one accounting data about the companies exclusive of a material influence of share price, and weighting said constituents based on at least one accounting data exclusive of a material influence of share price of the companies to obtain constituent weightings, wherein the constituent weightings are not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

68. The computer readable medium of claim 67, wherein the method further comprises:
creating said fixed income financial index, and said at least one portfolio, wherein said at least one accounting data comprises at least one of: dividends and/or ratios pertaining thereto.

69. The method of claim 67, wherein the accounting data comprises at least one of: any dividends and/or ratios pertaining thereto.

70. The system of claim 66, wherein the accounting data comprises at least one of: any dividends and/or ratios pertaining thereto.

71. The computer readable medium of claim 67, wherein the accounting data comprises at least one of: any dividends and/or ratios pertaining thereto.

72. A method for constructing a fixed income financial object market index based on accounting data, the method comprising:
creating the fixed income financial object market index comprising:
selecting constituent fixed income financial objects of said fixed income financial object market index based upon at least one accounting data regarding the companies associated with the financial objects, wherein said selecting is substantially exclusive of an influence of price, and weighting said constituent fixed income financial object based upon at least one accounting data regarding the entities associated with the financial object to obtain constituent weightings, wherein said weighting is substantially exclusive of an influence of price of the financial object associated with the entity, and wherein said weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

73. A method for constructing a fixed income financial object market index fund containing a portfolio of stocks based on a fixed income financial object market index, the method comprising:
creating a fixed income financial object market index fund including a portfolio of financial objects based on the fixed income financial objects market index wherein the fixed income financial objects market index is created by selecting constituent stocks of the fixed income financial objects market index based upon at least one accounting data about the companies exclusive of a material influence of price, and by weighting the constituent financial objects of the fixed income financial objects market index based upon at least one accounting data regarding the companies whose financial objects are in the fixed income financial objects market index, wherein the weighting is exclusive of a material influence of price of the entities, and wherein the weighting is not based on any of equal weighting, weighting in proportion to share price, weighting in proportion to market capitalization, and/or weighting in proportion to free float.

74. The method of claim 73, wherein said fixed income financial objects market index fund is held by, or on behalf of, one or a plurality of investors.

75. The method of claim 73, wherein said selecting comprises selecting based upon at least one of: a ratio of the accounting data; and/or a manipulation of the accounting data.

76. The method of claim 73, wherein the accounting data includes at least one of: relative size of a profits of a said entity; and/or pre-exceptional profits, sales, assets, cash flow, shareholders' equity, and/or a return on investment of a said entity.

77. The method of claim 73, wherein said accounting data comprises any generally accepted accounting data.

78. The method of claim 73, wherein said creating the fixed income financial objects market index comprises selecting stocks from a set of entities having a publicly available periodic financial report.

79. The method of claim 78, wherein said set of companies is not substantially equivalent to any one of the S&P 500 Index, and/or the Dow Jones Industrial Average.

80. The method of claim 78, wherein said selecting comprises:
selecting a subset from said set, wherein said set comprises at least one of substantially all of said companies having a publicly available periodic financial report, and/or a plurality of subsets of said set.

81. The method of claim 78, wherein said set comprises a collection of a plurality of partitioned subsets of financial objects.

82. The method of claim 78, wherein said index comprises a collection of a plurality of partitioned subindexes.

83. The method of claim 78, wherein said index is partitioned into subindexes based on any criterion.

84. The method of claim 78, wherein said set comprises a group of entities greater than 500 companies.

85. The method of claim 78, wherein said set comprises substantially all entities having publicly available periodic financial reports.

86. The method of claim 78, wherein said selecting comprises eliminating from said set a subset of entities chosen according to at least one accounting data substantially independent of price.

87. The method of claim 86, wherein said weighting comprises weighting the remaining companies after said eliminating, according to at least one accounting data.

88. The method of claim 86, wherein said eliminating comprises eliminating based on illiquidity.

89. The method of claim 80, wherein said financial objects include at least one of: substantially all U.S. financial objects, all financial objects in a market, all stocks in a sector of a market, and/or all stocks in a subset of a market.

90. The method of claim 80, wherein said stocks include U.S. stocks.

91. The method of claim 90, wherein said financial objects comprise securities.

92. The method of claim 73, wherein said financial objects comprise common financial objects.

93. The method of claim 73, wherein said fixed income financial objects market index fund is held by, or on behalf of, one or a plurality of investors.

94. A system, comprising:

an entity database storing aggregated accounting based data about a plurality of entities obtained from an external data source, each of said entities having at least one asset type associated therewith, said aggregated accounting based data compressing at least one non-market capitalization objective measure of scale metric associated with each said entity; and an analysis host computer processing apparatus coupled to said entity database, said analysis host computer processing apparatus comprising:
a data retrieval and storage subsystem operative to retrieve said aggregated accounting based data from said entity database and store said aggregated accounting based data to said entity database;
an index generation subsystem compressing:
a selection subsystem operative to select a group of said entities based on at least one non-market capitalization objective measure of scale metric;
a weighting function generation subsystem operative to generate a weighting function based on at least one non-market capitalization objective measure of scale metric, a index creation subsystem operative to create a non-market capitalization objective measure of scale index based on said group of selected entities and said weighting function; and a storing subsystem operative to store said non-market capitalization objective measure of scale index

95. The system according to claim 94, wherein said analysis host computer processing apparatus further comprises:
a normalization calculation sub-system operative to normalize said data for said at least one non-market capitalization objective measure of scale across said plurality of entities.

96. The system according to claim 94, wherein said at least one non-market capitalization objective measure of scale metric used by said selection subsystem differs from said at least one non-market capitalization objective measure of scale metric used by said weighting function generating subsystem.

97. The system according to claim 94, wherein said at least one non-market capitalization objective measure of scale metric used by said selection subsystem excludes any combination of:
market capitalization; and/or share price.

98. The system according to claim 94, wherein said at least one non-market capitalization objective measure of scale metric used by said weighting function generation subsystem excludes any combination of:
market capitalization weighting;
equal weighting; and/or share price weighting.

99. The system according to claim 94, wherein said selection subsystem is operative to:
(i) for each said entity, assign a percentage factor to each of a plurality of said at least one non-market capitalization objective measure of scale metric, each said percentage factor corresponding to the importance of a said at least one non-market capitalization objective measure of scale metric to said selection;
(ii) for each said entity, multiply each of said percentage factors with the corresponding non-market capitalization objective measure of scale metric thereof, to compute a selection relevance factor for said entity;
(iii) determine said selected group of entities by:
(A) comparing said selection relevance factors for said entities;
(B) ranking said entities based on said comparison;
(C) selecting a predetermined number of said entities having highest rankings to be said selected group of entities.

100. The system according to claim 94, wherein said weighting function generating subsystem is operative to:
(i) for each said entity comprising said selected group of entities, assign a percentage factor to each of a plurality of said at least one non-market capitalization objective measure of scale metric, each said percentage factor corresponding to the importance of a said at least one non-market capitalization objective measure of scale metric to said weighting;
and (ii) for each said entity comprising said selected group of entities, multiply each of said percentage factors with the corresponding non-market capitalization objective measure of scale metric thereof, said corresponding non-market capitalization objective measure of scale metric being a member of said plurality, to compute an entity function; and (iii) set said weighting function as a combination of the totality of said entity functions.

101. The system according to claim 94, wherein each of said asset type comprises at least one of:
a stock;
a commodity;
a futures contract;
a bond, including at least one of:
a corporate bond;
an investment grade corporate bond;
a high yield bond; and an emerging market bond;
a mutual fund;
a hedge fund;
a fund of funds;
an exchange traded fund (ETF);
a derivative; and/or a negative weighting on any asset.

102. The system according to claim 94, wherein said at least one asset type comprises a stock.

103. The system according to claim 94, wherein said at least one asset type comprises a commodity.

104. The system according to claim 94, wherein said at least one asset type comprises a futures contract.

105. The system according to claim 94, wherein said at least one asset type comprises a bond, the bond comprising at least one of: a corporate bond; an investment grade corporate bond; a high yield bond; and an emerging market bond.

106. The system according to claim 94, wherein said at least one asset type comprises a mutual fund.

107. The system according to claim 94, wherein said at least one asset type comprises a hedge fund.

108. The system according to claim 94, wherein said at least one asset type comprises a fund of funds.

109. The system according to claim 94, wherein said at least one asset type comprises an exchange traded fund (ETF).

110. The system according to claim 94, wherein said at least one asset type comprises a derivative.

111. The system according to claim 94, wherein said at least one asset type comprises a negative weighting on any asset type.

112. The system according to claim 948, wherein said negative weighting is performed for purposes of at least one of establishing and/or measuring performance for at least one of:
any security;
a portfolio of assets;
a hedge fund; and/or a long/short position.

113. The system according to claim 94, wherein said at least one non-market capitalization objective measure of scale metric comprises a measure of size of a said entity.

114. The system according to claim 113, wherein said measure of size of a said entity comprises at least one of:
gross revenue;
sales;
income;
earnings before interest and tax (EBIT);
earnings before interest, taxes, depreciation and amortization (EBITDA);
number of employees;
book value;
assets;
liabilities; and/or net worth.

115. The system according to claim 94, wherein said non-market capitalization objective measure of scale metric comprises a metric relating to an underlying asset type itself.

116. The system according to claim 115, wherein said asset type comprises at least one of:
a municipality;
a municipality issuing bonds; and/or a commodity.

117. The system according to claim 115, wherein said at least one non-market capitalization objective measure of scale metric comprises at least one of:
revenue;
profitability;
sales;
total sales;
foreign sales, domestic sales;
net sales;
gross sales;
profit margin;

operating margin;
retained earnings;
earnings per share;
book value;
book value adjusted for inflation;
book value adjusted for replacement cost;
book value adjusted for liquidation value;
dividends;
assets;
tangible assets;
intangible assets;
fixed assets;
property;
plant;
equipment;
goodwill;
replacement value of assets;
liquidation value of assets;
liabilities;
long term liabilities;
short term liabilities;
net worth;
research and development expense;
accounts receivable;
earnings before interest and tax (EBIT);
earnings before interest, taxes, dividends, and amortization (EBITDA);
accounts payable;
cost of goods sold (CGS);
debt ratio;
budget;
capital budget;
cash budget;

direct labor budget;
factory overhead budget;
operating budget;
sales budget;
inventory system;
type of stock offered;
liquidity;
book income;
tax income;
capitalization of earnings;
capitalization of goodwill;
capitalization of interest;
capitalization of revenue;
capital spending;
cash;
compensation;
employee turnover;
overhead costs;
credit rating;
growth rate;

tax rate;
liquidation value of entity;
capitalization of cash;
capitalization of earnings;
capitalization of revenue;
cash flow; and/or future value of expected cash flow.

118. The system according to claim 94, wherein at least one non-market capitalization objective measure of scale metric comprises a ratio of any combination of two or more non-market capitalization objective measure of scale metrics.

119. The system according to claim 118, wherein said ratio of any combination of said objective measure of scale metrics comprise at least one of:
current ratio;
debt ratio;
overhead expense as a percent of sales; and/or debt service burden ratio.

120. The system according to claim 115, wherein said at least one non-market capitalization objective measure of scale metric comprises a demographic measure.

121. The system according to claim 120, wherein said demographic measure of scale comprises at least one of:
a measure relating to employees;
floor space;
office space;
location; and/or other demographics of an asset.

122. The system according to claim 113, wherein said measure of size of a said entity comprises at least a demographic measure.

123. The system according to claim 122, wherein said demographic measure comprises at least one of:
a non-financial metric;
a non-market related metric;
a number of employees;
floor space;
office space; and/or other demographics of the asset.

124. The system according to claim 94, wherein said at least one non-market capitalization objective metric comprises a metric relating to geography.

125. The system according to claim 124, wherein said geographic metric relating to geography comprises a geographic metric other than gross domestic product (GDP).

126. The system of claim 94, further comprising a trading host computer processing apparatus, coupled to said analysis host computer processing apparatus, and operative to construct a portfolio of assets comprising one or more trading assets, said trading host computer processing apparatus comprising:
an index retrieval subsystem operative to retrieve said non-market capitalization objective measure of scale index;
a trading accounts management subsystem operative to receive one or more data indicative of investment amounts from one or more investors;
a purchasing subsystem operative to permit purchasing of one or more of said trading assets using said investment amounts based on said non-market capitalization objective measure of scale index.

127. The system of claim 126, further comprising a trading accounts database coupled to said trading accounts management subsystem, said trading accounts database operative to store said one or more data indicative of said investment amounts.

128. The system of claim 126, further comprising an exchange host computer processing apparatus coupled to said purchasing subsystem, said exchange host computer processing apparatus operative to perform one or more functions of said purchasing subsystem.

129. The system of claim 126, wherein said asset type comprises at least one of:
a fixed income asset;
a fund;
a mutual fund;
a fund of funds;
an asset account;
an exchange traded fund (ETF);
a separate account, a pooled trust; and/or a limited partnership.

130. The system according to claim 126, further comprising: rebalancing a pre-selected group of trading assets based on said non-market capitalization objective measure of scale index.

131. The system according to claim 130, wherein said rebalancing is performed on a periodic basis.

132. The system according to claim 130, wherein said rebalancing is based on the group of assets reaching a predetermined threshold.

133. The system according to claim 126, further comprising: applying one or more rules associated with said non-market capitalization objective measure of scale index.

134. The system according to claim 94, wherein the system may be used for at least one of:
investment management, and/or investment portfolio benchmarking.

135. The system of claim 94, wherein the selection sub-system is operative to perform enhanced index investing, comprising: computing said portfolio of assets in a fashion wherein at least one of: holdings; performance; and/or characteristics, are substantially similar to an external index.

136. The system according to claim 94, wherein said weighting subsystem is further operative to weight based on a non-financial metric associated with each of said selected group of entities.

137. A system operative to produce data indicative of the state of a plurality of entities, comprising:
an entity database storing aggregated entity data about said plurality of entities obtained from an external data source, each of said entities having at least one object type associated therewith, said aggregated entity data comprising at least one objective metric associated with each said entity;

an input/output subsystem; and an analysis host computer processing apparatus coupled to said entity database via said input/output subsystem, said analysis host computer processing apparatus comprising:
(A) a data retrieval and storage subsystem operative to retrieve said aggregated entity data from said entity database and store said aggregated entity data to said entity database;
(B) a data generation apparatus subsystem comprising:
(1) an object selection subsystem operative to select a group of said entities based on a said at least one objective metric;
(2) an object weighting function generating subsystem operative to generate a weighting function based on a said at least one objective metric;
(3) a data creating subsystem operative to create said data based on said group of selected entities and said weighting function;
(4) an object storing subsystem operative to store said data; and (5) a displaying subsystem operative to generate for visual display said data indicative of the state of said plurality of entities.

138. The system according to claim 137, wherein said data comprises an index;
each said objective metric comprises a non-market capitalization objective measure of scale metric;
each said entity data comprises a corporate entity data; and each said object type comprises an asset data of a said entity.

139. The system according to claim 138, wherein said analysis host computer processing apparatus further comprises:
a normalization calculation subsystem operative to normalize said data for a said at least one non-market capitalization objective measure of scale metric across a said plurality of entities.

140. The system according to claim 137, wherein said at least one objective metric used by said object selection subsystem differs from said at least one objective metric used by said object weighting function generating subsystem.

141. The system according to claim 137, wherein said at least one object metric used by said object selection subsystem excludes any combination of data regarding:
market capitalization; and/or share price.

142. The system according to claim 137, wherein said at least one object used by said object weighting function generating subsystem excludes any combination of data regarding:
market capitalization weighting;
equal weighting; and/or share price weighting.

143. The system according to claim 137, wherein said object selection subsystem comprises a selection subsystem operative to:
(i) for each said entity, assigning a percentage factor to each of a plurality of said at least one objective metric, each said percentage factor corresponding to the importance of a said at least one objective metric to said selection;
(ii) for each said entity, multiplying each of said percentage factors with the corresponding objective metric thereof, to compute a selection relevance factor for said entity;
and (iii) determining said selected group of entities by:
(A) comparing said selection relevance factors for said entities;
(B) ranking said entities based on said comparison; and (C) selecting a predetermined number of said entities having highest rankings to be said selected group of entities.

144. The system according to claim 137, wherein said object weighting function generating subsystem is operative to:
(i) for each said entity comprising said selected group of entities, assigning a percentage factor to each of a plurality of said at least one objective metric, each said percentage factor corresponding to the importance of a said at least one objective metric to said weighting;

145 (ii) for each said entity comprising said selected group of entities, multiplying each of said percentage factors with the corresponding objective metric thereof, said corresponding objective metric being a member of said plurality, to compute an entity function; and (iii) setting said weighting function as a combination of the totality of said entity functions.

145. The system according to claim 137, wherein each of said object types comprises data regarding an asset of a said entity, said asset comprising at least one of:
a stock;
a commodity;
a futures contract;
a bond, including at least one of:
a corporate bond;
an investment grade corporate bond;
a high yield bond; and an emerging market bond;;
a mutual fund;
a hedge fund;
a fund of funds;
an exchange traded fund (ETF);
a derivative; and/or a negative weighting on any asset.

146. The system according to claim 137, wherein a said at least one objective metric comprises data regarding a said entity, said data comprising data regarding at least one of:
revenue;
profitability;
sales;
total sales;
foreign sales, domestic sales;
net sales;

gross sales;
profit margin;
operating margin;
retained earnings;
earnings per share;
book value;
book value adjusted for inflation;
book value adjusted for replacement cost;
book value adjusted for liquidation value;
dividends;
assets;
tangible assets;
intangible assets;
fixed assets;
property;
plant;
equipment;
goodwill;
replacement value of assets;
liquidation value of assets;
liabilities;
long term liabilities;
short term liabilities;
net worth;
research and development expense;
accounts receivable;
earnings before interest and tax (EBIT);
earnings before interest, taxes, dividends, and amortization (EBITDA);
accounts payable;
cost of goods sold (CGS);
debt ratio;
budget;

147 capital budget;
cash budget;
direct labor budget;
factory overhead budget;
operating budget;
sales budget;
inventory system;
type of stock offered;
liquidity;
book income;
tax income;
capitalization of earnings;
capitalization of goodwill;
capitalization of interest;
capitalization of revenue;
capital spending;
cash;
compensation;
employee turnover;
overhead costs;
credit rating;
growth rate;
tax rate;
liquidation value of entity;
capitalization of cash;
capitalization of earnings;
capitalization of revenue;
cash flow; and/or future value of expected cash flow.

147. The system of claim 137, further comprising a trading host computer processing apparatus, coupled to said analysis host computer processing apparatus, and operative to

148 construct a portfolio of assets comprising one or more trading assets, said trading host computer processing apparatus comprising:
a data retrieval subsystem operative to retrieve said data;
a trading accounts management subsystem operative to receive one or more data indicative of investment amounts from one or more investors; and a purchasing subsystem operative to permit purchasing of one or more of said trading assets using said investment amounts based on said data.

148. The system of claim 147, further comprising a trading accounts database coupled to said trading accounts management subsystem, said trading accounts database operative to store said one or more data indicative of said investment amounts.

149. The system of claim 147, further comprising an exchange host computer processing apparatus coupled to said purchasing subsystem, said exchange host computer processing apparatus operative to perform one or more functions of said purchasing subsystem.

150. The system according to claim 147, further comprising: a rebalancing computational subsystem operative to rebalance a pre-selected group of trading assets based on said data.

151. The system according to claim 147, wherein said rebalancing computational subsystem performs rebalancing on a periodic basis.

152. The system according to claim 147, wherein said rebalancing computational subsystem performs rebalancing based on the trading assets reaching a predetermined threshold.