The Butler Pinkerton Calculator: An Update - BVMarketData

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Response to Roger Grabowski’s Slides • “CSRP estimates derived from beta estimates are subject to estimation error (i.e., CSRP estimates are unreliable)” – True; Use all five days of the trading week – Duff & Phelps’ data, dependent upon sum beta, is also subject to estimation error • How would Duff & Phelps or Morningstar’s data look if another day of the month was used? – No one knows. The databases are not transparent. – What is not subject to estimation error? This is valuation! • “The Sharpe Ratio does not cover cases in which one investment return is involved” – Other than in private company valuation there are no individual investments. – Stocks are part of portfolios 36
Summary: • All models are wrong, but some are useful. George Box, statistician – Total beta and the BPC are very useful. – You can use them (or perform the calculations yourself) and be subject to Mr. Kasper’s alleged criticisms or be subject to harsh criticisms from the Court. • Your Choice! • It takes a model to beat a model. Milton Friedman, Nobel Prize winning economist – Total beta and/or the BPC have beaten other models/databases that require a complete guess for CSRP: 1) And do not empirically capture total risk and 2) Are not transparent and empowering 37
Page 1 and 2: The Butler Pinkerton Calculator: An
Page 3 and 4: Let’s Get Some Things Out of the
Page 5 and 6: Traditional Factor Models: Use at O
Page 7 and 8: The Courts Want Empirical Data! •
Page 9: The Solution: Total Beta and the BP
Page 13 and 14: More Transparency 13
Page 15 and 16: Impeach Inferior Estimates of Cost
Page 17 and 18: Interesting Observation: “I Don
Page 19 and 20: Other BPC Applications: • First,
Page 21 and 22: Other BPC Applications (continued):
Page 23 and 24: Total Beta:BPC and Peer Review 1) R
Page 25 and 26: Another Select Testimonial • We b
Page 27 and 28: Questions to Consider: • If Total
Page 29 and 30: The Butler Pinkerton Calculator: An
Page 31 and 32: Are You on the Left-side or the “
Page 33 and 34: Other Observations: Instability of
Page 35: Response to Roger Grabowski’s Sli

The Butler Pinkerton Calculator: An Update - BVMarketData

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