January 12, 2022
By examining insider transactions with earnings call transcripts together, we find stronger, more predictable market reactions when the words of company executives agree with their actions.
By examining these two dimensions together, we find stronger, more predictable market
reactions when the words of company executives agree with their actions:
Positive sentiment in earnings call transcripts leads to a more pronounced price
drift when met with more insider buys over the trailing quarter, with a similar
negative drift when negative sentiment coincided with more insider sales.
We can enhance the earnings call transcripts strategies by applying an insider
transactions overlay tilt to overweight the companies where the transcripts-based
sentiment and actions of insiders match, and vice versa.
The insider-enhanced strategies consistently outperform those based on standalone
transcripts signals, particularly over long holding periods, with an average 20%
Information Ratio improvement in the U.S. trading universes.
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RavenPack Earnings Intelligence combines signals from separate sources augmented with sentiment and thematic analytics for a powerful alternative that removes the limits of isolated vendor data.
In our latest research paper, we focus specifically on European markets by sequentially overlaying three RavenPack Earnings Intelligence signals.
We consider incorporating sentiment signals from news, earnings call transcripts, and insider transactions to
boost the risk-adjusted returns, and revive factor performance.
We find stronger, more predictable market reactions when the words of company executives agree with their actions.
We explore the combination of earnings-related news and earnings call transcripts.
Incorporating Earnings Calls transcript data increases IR to 1.4 for US Mid/Large Caps and 2.3 for Small Caps.