RavenPack | September 23, 2021
Incorporating Earnings Calls transcript data increases IR to 1.4 for US Mid/Large Caps
and 2.3 for Small Caps.
Every quarter, earnings calls provide investors with an opportunity to gain additional
insights into company performance. The discussion of financial results between executives
and investors discloses hard information that is widely used in the fundamental analysis of
Incorporating Earnings Calls transcript data provides an opportunity to uncover additional
alpha. We built three independent trading signals from the data, and found that:
Document Sentiment is a strong standalone signal, with Information Ratio (IR) above
1.1 for US Mid/Large Caps and upwards of 2.0 for Small Caps over holding periods of
up to 1 week, or above 1.0 and 1.7 for holding periods of about 1 month.
Combined with two other signals, Event Sentiment and a Transparency Score, the IR
increases to 1.4 for US Mid/Large Caps and 2.3 for Small Caps for shorter holding
periods. Monthly holding period IR for U.S. Small-Caps increases to 2.0.
Combining transcripts data with RavenPack News Analytics enhances the performance of U.S.
strategies across nearly all holding periods, providing a valuable addition to existing
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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.