April 4, 2022
In our latest research paper, we focus specifically on European markets by sequentially overlaying three RavenPack Earnings Intelligence signals
In recent white papers from our Earnings Intelligence research series, we reviewed the alpha-generative properties of several dataset combinations over various universes and holding periods. In our latest research paper, we focus specifically on European markets by sequentially overlaying three RavenPack Earnings Intelligence signals:
❶ Sentiment from earnings-call transcripts
❷ Sentiment from earnings-related news and
❸ Net insider trading activity in between reporting periods.
Cumulative log-returns for Insider-tilted Earnings signals (Transcripts and Earnings News) for different exponential smoothing decays (leading to different effective holding periods). Results for Mid/Large-Cap (left) and Small-Cap (Right) companies in the European Market. Source: RavenPack, March 2022
Our backtests of long-short, dollar-neutral strategies in the European Mid/Large-Cap universe show that:
Document Sentiment from transcripts, which aggregates a machine
learning-generated sentiment measure for every sentence transcribed
from the Earnings call, provides an Information Ratio of 1.0 across
a wide range of effective holding periods, with Annualized Returns
ranging from 7% to 3%.
Combining sentiment from earnings-related news with Earnings-call
transcripts sentiment enhances Information Ratios and Annualized
Returns up to monthly effective holding periods. For an effective
holding period of ten days, a blended signal improves the Information
Ratio of the earnings-news based strategy from 1.3 to 1.5.
Adding an insider transaction overlay to the combined earnings-call
transcripts and earnings-news signals leads to a significant
increase in the Information Ratios, of about 20% over effective
holding periods of more than 5 days.
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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.