4 April 2016
In a recent study, we considered whether earnings sentiment could provide the edge that everyone so much desires.
In our latest research, we find that earnings sentiment gives investors an edge over consensus. Our new earnings sentiment indicator derived from real-time news and social media significantly outperforms consensus estimates, both in terms of Information Ratios and annualized returns.
Below is an overview of our key findings:
- The use of earnings sentiment vs. consensus estimates yields Information Ratios of 2.55 vs. 1.36 across the Russell 1000 and 1.93 vs. 1.45 across the European equivalent portfolio
- The outperformance by earnings sentiment is consistent across holding periods of 1 to 21 days; typically resulting in bigger portfolios at a similar turnover rate
- Return correlation is low with 26% in the US and 12% in Europe
Access the white paper on bit.ly/1XIl2zj