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Parker Center for Investment Research Initiatives

The Parker Center for Investment Research is dedicated to the creation and dissemination of leading-edge research relevant to investment managers. At the heart of this enterprise is a research laboratory with the capability to integrate real-time data feeds and perform fundamental financial analysis on large samples of firms. Using proprietary software developed by the center, we will test investment ideas nominated by recent research in finance and accounting.

Until now, academic research and investment management practices have taken divergent paths. Empirical financial academics have focused strictly on the task of back-testing investment theories using historical data. Real-time data has been largely the domain of practitioners, who often do not have the time to absorb and synthesize the latest ideas suggested by research. Our goal is to bridge this gap by simultaneously extending the research frontier and disseminating our findings to the practicing community and our students. Some expected outputs from this process are research working papers, stock recommendations, lists of seemingly over- and under-valued securities, estimates of fundamental value for selected equity securities, as well as pedagogical material useful for educational purposes at the Cornell Johnson School.

We will construct a trading room in a new state-of-the-art facility, housed in the historic Sage Hall. In this trading room, we will develop a multi-purpose electronic platform; this facility will be used for other computer-based research and instructional purposes when no trading classes are in session. We will also construct a smaller dedicated trading studio to permanently house electronic data feeds, market-monitors and trading desks. This will complement a research laboratory in which we will test the latest investment theories, using up-to-the-minute financial data.

As a third initiative, we will create a student-managed investment fund. This fund will make use of the investment ideas developed by the research center and the trading room facilities. While the rest of this initiative does not require an investment fund, clearly the existence of such a fund leverages the usefulness of both the research laboratory and the trading room.

In the project’s first phase, we will develop the infrastructure necessary to link real-time stock prices and quotes from global markets with archival data from more traditional sources. Major exchanges world-wide now disseminate market data through vendors such as Reuters and Telerate. We will combine this live pricing information with the latest fundamental data (from Compustat, One Source, Compact Disclosure, etc.), and analyst earnings forecasts (I/B/E/S, First Call, etc.). These and other data sources will be integrated using our own proprietary valuation and investment software to develop cash-flow based valuations for individual stocks, as well as industry sectors and countries.

A major challenge in this project is the implementation of these new valuation models using live data from global markets. This task is computationally intensive and requires the capability to assimilate large quantities of new information quickly. It is in this area that the Intel technology will give us a real advantage; this project will open new areas of research and create a foundation for dialog between our faculty, students and corporate partners. Researchers and students will have access to vast amounts of real-time data and news, and will be able to implement a wide variety of techniques to process this information. Additionally, this project will have a major impact on curriculum. A new immersion program in finance will have approximately 30 MBA students using these systems heavily throughout the first year. The Trading Room will be using Carnegie Mellon's FAST modules for at least three finance classes. Professor Donald Greenberg's technology and imaging classes will also be involved in developing visualization systems and applications.

Participants

Last modified on: 07/30/99