[R-sig-finance] Using R in equity research

Andrew West jgalt70 at yahoo.com
Mon Jun 7 02:00:09 CEST 2004

I had been using Minitab in my MBA program at NYU, but
my professor of regression and data analysis Jeff
Simonoff suggested that ambitious students might try
R. I didn't use it for his course but gradually taught
myself to perform regression analysis and diagnostics
with R. 

I'm definitely not from a mathematical/statistical
background. I've been driven to statistics by a desire
to test assumptions I form about fundamental company
research and equity analysis.

Most equity research people tend to not check
diagnostics very well, and thus violate basic
assumptions I think, because they'd rather be
overconfident about their assumptions. That's an
over-generalization though.

I've been doing valuation studies within industries,
looking at how some valuation measures relate to
company characteristics and external factors over
time. My professor suggested using mixed effects
models for such longitudinal data studies, and I don't
have a budget for this sort of thing, so using R and
the NLME package was a natural choice. I think I'm
doing some things with it I haven't seen other
analysts do.  

I notice that most financial users of R and S-Plus
tend to be focused on derivatives and time-series
applications. I haven't seen many approaching time
series data from a multi-factor relationship
perspective. Anyone else seen good applications,
publications on that kind of analysis?

Andrew West

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