Data
Research Blog Events
About Careers Newsroom Get Started

Enhancing Quantamental Signals with Sentiment

Milind introduces a Quantamental investing model and synopsizes a sentiment signal, derived from alternative data. This model helps anticipate buyouts.

Quantamental Investing with Sentiment Data

The author shows how a sentiment signal, derived from news and social media, performs as an overlay to an existing leveraged buyout strategy (LBO). The study should be of interest to activists, risk arbitrageurs and speculators on the long side as well as market participants (typically quants), looking to eliminate event risk on the short side.

The QMIT Leveraged Buyout (LBO) Model

The paper introduces the QMIT LBO model developed by Milind and his team. In addition to a long-term hit rate of 41%, the Top 100 model predictions can be traded profitably as an equal-weighted long portfolio with a Sortino ratio of close to 2.5 over the 19-year backtesting history.

Enhancement via Sentiment-Based Alternative Data

To address potential event risk, a sentiment signal is introduced as an overlay into the model. In particular, they apply RavenPack’s Sum Excess Sentiment Indicator (SESI). Given that SESI captures news-based sentiment, which may include rumors on LBO names, it is logical to ascertain whether benefits may accrue from trading a combined quantamental signal.

Key Results of this Quantamental Strategy

Considering the weekly rebalanced LBO Top 100 signal with a SESI overlay, the authors find the following key results:

  • Absolute +8.6% improvement to annualized returns, for the best overlay scenario tested
  • +46% boost to the Sharpe ratio, for the best overlay scenario tested
  • Substantial improvements over the benchmark signal – in returns, Sharpe, and Sortino
  • Significantly improved drawdown profile of the overlaid strategy
Request White Paper

Request White Paper

We will process your personal data with the purpose of managing your personal account on RavenPack and offering our services. You can exercise your rights of access, rectification, erasure, restriction of processing, data portability and objection by emailing us at privacy@ravenpack.com. For more information, you can check out our Privacy Policy.

Discover the RavenPack Platform

Choose from over 190 curated datasets covering a variety of different topics.

Explore Now