Manish Aurora is trying to spoil our fun. A quant at heart, and by training, Mr. Aurora has spent years attempting to develop a model that will explain and predict stock prices. If he has his way, we won’t be permitted any more “irrational exuberance.” We’ll have to invest with our calculators, not our gut.

He has been driven to this party-pooper undertaking by a profound uneasiness with the technology boom. Unaccountably, Mr. Aurora still believes that investors behave rationally. (Most of us are content with the view that a lot of people are simply nuts.) Understandably, modeling the market excesses of the late 1990s has proven to be quite a chore.

Today, however, he is confident enough of his computer-driven analysis to not only offer insight into stocks, but to open his own hedge fund. His firm, Vidya Capital Management, is headquartered in New York. However, Vidya has what may be a competitive advantage, in that much of the company’s stock valuation work is done in India.

Mr. Aurora received his M.B.A. from the University of Chicago, and spent a couple of years as an associate at Nomura Securities and then at BlackRock. He went on to become an independent consultant, helping firms like JP Morgan and Merrill Lynch sort out risk parameters for business lines like foreign exchange trading and derivatives swaps.

In the late 1990s, he co-founded, with his father Harbhajan Aurora, Rational Investing LLC, which developed the models on which Vidya now relies. Mr. Aurora’s father had long worked for Chicago Pneumatic, where he represented the company on sales to large infrastructure construction projects in India. He then moved into textile manufacturing and trading.

Today, Vidya has a team of five analysts and three software developers in India, overseen by the senior Mr. Aurora, while the son takes on the investment oversight from the New York office. The company has spent its time applying its carefully crafted valuation formulas to an ever-widening universe of stocks.

The essence of the approach is a discounted free cash flow analysis. Certainly, Vidya is not the only firm that evaluates cash flow. However, they are one of the few, perhaps, that attempts to remove human bias from the process. Projections are based on recent financial performance, not on what managements say.

Also, the model makes assumptions that in effect project a reversion to the mean over a 10-year period. That is, if a company is growing much faster than the market overall, the model assumes a slowdown over time, possibly generated by financing requirements or developing competition.

This would tend to eliminate the attractiveness of companies selling at huge multiples of revenues, such as appeared during the technology boom, when analysts were happily extrapolating recent results into the future. The logical conclusion to some of those overwrought valuations would have been the company taking over the state of Texas, for example.

The company also relies on “scrubbed” data – meaning that the analysts in Mumbai make sure that public financial data is consistent, and not skewed by accounting changes and the like.

The most important part of the process is determining a risk-adjusted discount rate, which relates to the yield curve and to various company-specific factors such as R&D requirements or capital spending needs.

The unusual aspect of the model is that it allows comparisons between companies in any industry. Thus, entire sectors can appear attractive at a given point. The model has been able to identify mispricing of stocks, which usually, according to Mr. Aurora, last no longer than six months after the company releases financial information altering its perceived valuation.

So how is Mr. Aurora doing with this wealth of statistical data in his pocket? The portfolio today has 119 positions, 66 long and 53 short. In June, the fund was up 0.1%,and for the year it is ahead 2.6%. While these numbers aren’t great, they are ahead of the S&P 500, which was down 1.7% for the first half.

So-called “back tested” performance, determined by imposing Vidya’s model on historical stocks, turns out to be extremely impressive. Investors, however, tend to discount these “what if” results.

Stocks currently in the portfolio are an eclectic bunch, spanning multiple industries and size categories. They include, on the long side, Alpharma Incorporated, Sony, Louisiana Pacific, and Maxtor Corporation. On the short side, Mr. Aurora has placed bets with James River Coal, K2 Incorporated, Glamis Gold, and Urban Outfitters. The sheer breadth of these names is indicative of the statistical selection process.

Vidya Capital has only been up and running since last November, and like a lot of new funds, is having trouble raising money. It may be that the model is too complex, or that there are too many new funds, or that investors are skeptical of the effort to minimize human calculation in the investment process. The best antidote to that concern will be, of course, above-average results. Or, another dose of irrational exuberance.