March 16, 2022
In addition to providing insights about company performance, earnings calls can offer a window into the financial executives’ views about the past, present, and future state of the economy.
Earnings calls can offer a window into the financial executives’ views about the past, present, and future state of the economy. In addition to company-specific performance metrics, earnings call transcripts contain soft, non-quantitative information such as sentiment or readability statistics that can be correlated with subsequent market reactions.
In this white paper, we leverage RavenPack Edge event detection and sentiment scoring capabilities to analyze earnings call transcripts and create a real-time Transcript Economic Sentiment Indicator (TESI) for the U.S.
We find that:
TESI can identify significant inflection points in the U.S. economic activity and detect meaningful changes in the business cycle. The model accurately detects up to 70% of the U.S. GDP upshifts and 60% of downshifts.
TESI-based stock-bond rotation strategies outperform all common static benchmarks on a risk-adjusted basis, with Sharpe Ratios ranging from 0.74 to 0.90 using daily rebalancing and 0.89 to 1.27 when rebalancing monthly.
An overlay strategy using combined TESI and ISM Manufacturing PMI-based signals further enhances performance, with the Sharpe Ratio improving from 0.91 to 1.21 when fully rotating between the asset classes based on the signal.
Get the whitepaper for more detail on how TESI can help with creating profitable investment strategies.
RavenPack Edge tracks over 7,000 key business, geopolitical and macroeconomic events across 7.1 million companies, 4.5 million individuals, and 60,000 products and services. Using proprietary natural language processing technology powered by heuristic and machine learning engines, sentiment data is derived from over 40,000 sources including news, filings and transcripts in 13 languages.
RavenPack is the leading data analytics provider for financial services. The company's clients include the most successful hedge funds, banks, and asset managers in the world.
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