Aggregated collective intelligence of investors through crowdsourcing

Rating

Stonder is a platform for aggregating the collective intelligence of investors by crowdsourcing investor sentiment. Stonder does this by collecting investor opinions – Buy-Hold-Sell – on individual stocks from a large, diverse user base. Users give their ratings with an interface familiar from other popular applications. The foundation of Stonder is a concept called the Wisdom of the Crowd.

The wisdom of crowds has proven to be accurate in many applications. Stonder brings collective intelligence to the investment world by crowdsourcing investor sentiment. Stonder provides you tools to see what investors think about individual companies and the market in general. You can see how the opinions have changed over time.

Stonder rating

The opinions are aggregated with an algorithm to a user consensus estimate on each individual company. This opinion is called Rating in Stonder. The Rating for each company is displayed in a list format. The company list can be sorted by rating or company name and filtered to show only markets or segments of interest.

Sentiment

Stonder sentiment

Another indicator of interest in Stonder is a Sentiment indicator based on the Rating data. Sentiment shows the relative attractiveness of a specific company in relation to its rating history. Sentiment visualises much faster changes in a company’s Rating. These are the key metrics Stonder offers to users.

Synthetic portfolio

Stonder creates automatically a synthetic portfolio for each user based on their active opinions. Each Long and Short opinion creates an entry into the synthetic portfolio. Each stock has an equal weight in the portfolio and weights are rebalanced daily. Stonder calculates performance for these synthetic portfolio and users are ranked based on the performance of their portfolios on 90, 30 and 7 day periods. You can see how well your picks have against others and you can even drill into other users’ portfolios to see what the best performing portfolios contain.

Automated signals

Stonder also generates automatic signals, called Pulse when there, for example, is more rating activity going on in a company than normal. Likewise, a rapid increase in Long or Short votes generates a Pulse.

Furthermore, Stonder has social functionality that allows users to interact with each other or comment on individual stocks. You can also build your own private team with your friends. This allows you to compete and interact only with other team members. Outside users will not have access to the internal conversations.

Background: why was Stonder created?

Regulation is profoundly changing the landscape of investment research in Europe.

The European Union has been working on a revision of the Markets in Financial Instruments Directive (MiFID) for some time. According to European Commission, MiFID II is set to take place in the 2018. One important change in MiFID II are the new rules for unbundling investment research from sell-side sales and trading activities. This is to ensure more unbiased and independent investment research. On the buy-side, the new regulation means that research can no longer be bought with so called “soft-dollar” agreements, but cash needs to be allocated separately for purchasing investment research.

The new regulation will have significant implications on the investment research market. The supply of sell-side investment research has already been on decline due to regulatory pressure and the new MiFID II regulation is likely to decrease the availability of investment research even further.

This is hurting retail investors in particular as small investors neither have the same capacity to buy external research as institutional investors have nor do they have in-house research capacity. Companies with small market capitalisation or poor liquidity are also more likely to be “below the radar screen” in the future and will suffer from lower valuation and deteriorating liquidity.

The changing regulatory environment and its foreseen implications was a key driver for us to search for alternatives for providing some insight for the smaller investors and awareness for smaller companies even in the future under MiFID II regulation.

While some efficient market hypothesis purist argue that all information is in the price, there are other schools of thought as well. Behavioural economics and behavioural finance have established themselves as reputable disciplines. For anyone wishing to learn more, Richard Thaler’s excellent book Misbehaving: The Making of Behavioural Economics is a good read.