MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Failing Governance Creates Reputational Risk For Board

C. HUYGENS - Monday, August 14, 2017
“…CBA’s board was forced to act decisively due to the reputational risks prompted by Austrac’s legal action and concerns shareholders could trigger a “spill motion” against the entire board…”

The Financial Times explains that a spill motion is a shareholder vote to determine if all board directors should stand for re-election, and can be triggered when a company’s remuneration report receives a No vote of 25 per cent or more in two successive years.

Read more in the Financial Times.

Repustars 2017 August 12

C. HUYGENS - Saturday, August 12, 2017

Weekly Reputation Index Metrics


At the close of trading August 11, 2017, REPUSPX, REPUVART, and REPUVAR stood at 5514.54, 4283.25 and 3387.30 respectively. Over the past four weeks, the three have changed by -2.34%, -3.21%, and -3.30%. The benchmark S&P500 Composite Index stood at 2126.44 (31 Dec 2001=1000) and has changed over the past four weeks by -0.73%. The current calendar year spread between REPUVAR and the S&P500 is 1.00%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 13.32% and 11.90% respectively; the S&P500 Composite Index has changed by 11.69%. The trailing 12-month spread between REPUVAR and the S&P500 is 0.21%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 13.80% and 8.66% respectively; the S&P 500 Composite Index has changed by 26.25%.

The trailing 12-month, and trailing 36-month returns for REPUSPX are 17.63%, and 26.25% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 5.94%.

The spreads between the S&P500-only index informed by reputation metrics, REPUSPX, and the broad market index informed by reputation metrics, REPUVAR, for the calendar year and for the trailing twelve months respectively are -2.51% and -5.73%.

Side Note: A description of the portfolio constituents and historical returns data from December 31, 2001 can be obtained on request from Technology Option Capital, its manager. Click Here.

Background

The RepuStars® Variety Corporate Reputation Index calculated by S&P/Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re Reputational Value Metrics. The metrics comprise non-financial indicators of reputational value (RVM) and ranking (CRR).
The RepuStars Variety Corporate Reputation Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR.  Click on the ticker names for real time quotes.

The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to  Steel City Re’s proprietary Reputational Value Metrics™, which track 7400 companies weekly. The principles behind measuring reputational value are described in the book, Reputation, Stock Price, and You: Why the market rewards some companies and punishes others (2012, Apress).

The RepuStars indices are reconstituted annually in the first week of January and posted by S&P/Dow Jones Indexes in the third week. The Indices were last reconstituted at the close of the markets 23 January 2017.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index. Click here for an analysis of periodic returns.

The design of the portfolio is governed by principles of behavioral economics, market signaling, and the implicit timing arbitrage between the behaviors of equity stakeholder and all other stakeholders.

Reputation, Risk and Finance

Join our community on Linked-In and stay in the information flow and/or follow Twitter missives at #ReputationRisk.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

Brexit and Sovereign Reputation Risk

C. HUYGENS - Friday, August 11, 2017
BDO, the global consultancy, tracked the valuation of businesses in the aftermath of BREXIT, when just over a year ago, on 23 June 2016, the UK decided 51.9% to 48.1% to leave the EU.

“Future performance may be significantly different given an environment of low exchange rates, growing inflation, and the possibility of continuing low GDP growth and falling consumer confidence.”

Read more in the BDO Blog.

Benefits of Better Analysis of Reputational Losses

C. HUYGENS - Thursday, August 10, 2017
“[Steel City Re's] product is innovative ... #reputational #risk can now be measured, quantified, insured, self-insured through a captive, monitored and proactively mitigated for publicly trade companies,” said John Kelly, at the Vermont Captive Insurance Association (VCIA).

Read more in the Intelligent Insurer.

Industry Under Siege (No, its not banking)

C. HUYGENS - Wednesday, August 09, 2017
“When commentators routinely compare Silicon Valley today with the arrogance, isolation and destructive might of Wall Street before the crash 10 years ago this week, it is time to start thinking about reputation — and what might ensue when the glamorous superficial allure of these tech giants wears off.”

Read more in the Financial Times.

Repustars 2017 August 5

C. HUYGENS - Saturday, August 05, 2017

Weekly Reputation Index Metrics


At the close of trading August 4, 2017, REPUSPX, REPUVART, and REPUVAR stood at 5610.75, 4367.53 and 3456.79 respectively. Over the past four weeks, the three have changed by 0.74%, 0.95%, and 0.94%. The benchmark S&P500 Composite Index stood at 2157.37 (31 Dec 2001=1000) and has changed over the past four weeks by 2.13%. The current calendar year spread between REPUVAR and the S&P500 is 1.66%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 18.37% and 16.92% respectively; the S&P500 Composite Index has changed by 14.44%. The trailing 12-month spread between REPUVAR and the S&P500 is 2.47%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 17.00% and 11.77% respectively; the S&P 500 Composite Index has changed by 28.99%.

The trailing 12-month, and trailing 36-month returns for REPUSPX are 21.45%, and 28.99% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 7.01%.

The spreads between the S&P500-only index informed by reputation metrics, REPUSPX, and the broad market index informed by reputation metrics, REPUVAR, for the calendar year and for the trailing twelve months respectively are -2.22% and -4.53%.

Side Note: A description of the portfolio constituents and historical returns data from December 31, 2001 can be obtained on request from Technology Option Capital, its manager. Click Here.

Background

The RepuStars® Variety Corporate Reputation Index calculated by S&P/Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re Reputational Value Metrics. The metrics comprise non-financial indicators of reputational value (RVM) and ranking (CRR).
The RepuStars Variety Corporate Reputation Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR.  Click on the ticker names for real time quotes.

The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to  Steel City Re’s proprietary Reputational Value Metrics™, which track 7400 companies weekly. The principles behind measuring reputational value are described in the book, Reputation, Stock Price, and You: Why the market rewards some companies and punishes others (2012, Apress).

The RepuStars indices are reconstituted annually in the first week of January and posted by S&P/Dow Jones Indexes in the third week. The Indices were last reconstituted at the close of the markets 23 January 2017.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index. Click here for an analysis of periodic returns.

The design of the portfolio is governed by principles of behavioral economics, market signaling, and the implicit timing arbitrage between the behaviors of equity stakeholder and all other stakeholders.

Reputation, Risk and Finance

Join our community on Linked-In and stay in the information flow and/or follow Twitter missives at #ReputationRisk.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

Wells Fargo Drops Yet Another Shoe

C. HUYGENS - Friday, August 04, 2017
Reputation risk cost is often high because of losses initially not visible, like the submerged mass of an iceberg.

“Wells Fargo said that the number of fake bank accounts set up by its staff could be significantly higher than previously thought and warned investors that it risks further regulatory investigations into a new scandal over car insurance.”

Strategies to convince stakeholders there isn't an iceberg just below the surface—which will work as long as the assertion is true—include warranties on governance and related transparent financial products.

Read more in the Financial Times.

Venezuela's Reputation Risk

C. HUYGENS - Thursday, August 03, 2017
“Venezuela’s reputational risk isn’t going to get better. On the contrary, it’s only going to get worse….Western investors, already wary of ploughing money into one of the world’s most volatile countries, will be more reluctant to do so given the government’s increasing illegitimacy.”

Read more in the Financial Times.

Reputational Benefits of Exceeding Expectations

C. HUYGENS - Tuesday, August 01, 2017
Exceeding low expectations out of the box (stock dropped 1% the day he was appointed), now

"the board and investors are betting he can work...magic in resuscitating the reputation of the entire company..."

Read more in the Financial Times.

Reputation Risk Due to Ethical Controls Failure

C. HUYGENS - Monday, July 31, 2017
Germany's big three groups, Volkswagen, Daimler and BMW, and VW units Porsche and Audi have been accused of holding secret meetings and colluding on technology. There are controls to prevent such ethical breaches. How can they fail?

“German managers are less aware of the financial consequences of wrongdoing than their US counterparts,” she says. There is less of a recognition that fines imposed by regulators for lawbreaking “can sometimes be so big they can ruin the company”.

Read more in the Financial Times.

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