Video Friday: GMI's Forensic Alpha Model

www3.gmiratingsThe SEC misses 85% of fraud. GMI’s model is designed to identify fraud in advance. I’d love to see funds using this system to modify their indexes. If many do so, it could be one of the biggest tools in improving corporate governance.

 Speaking to the Certified Fraud Examiners’ 2013 Global Fraud Conference, former Enron CFO Andrew Fastow said,

In my opinion, the problem today is 10 times worse than it was when Enron had its implosion in what was called the era of corporate fraud, The things that Enron did, and that I did, are being done today. In many cases, they’re being done in such a manner that makes me blush, and I was the CFO of Enron.

More than 14% of public companies engage in fraudulent accounting. On average, these misleading practices reduce enterprise values by 22%. Based on extensive research on the “Fingerprints of Fraud”, empirically validated forensic algorithms can help investors protect and boost portfolio performance.

GMI Ratings’ Forensic Alpha Model uses forensic analysis to improve risk-adjusted returns of equity and fixed-income investment portfolios.

Led by Ophir Gottlieb, Managing Director of Quantitative Research, this introduction covers:

  • The latest research on the economic impact of fraudulent and aggressive accounting
  • The performance of GMI Ratings’ Forensic Alpha Model (FAM) in improving portfolio returns and minimizing volatility.

I would love to hear from readers about similar tools developed by others using corporate governance measures to increase beta. Please e-mail me.

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