A scalable approach to extracting alpha from the sentiment analysis of earnings call transcripts.
Earnings disclosures are critical for investors, but company executives tend to carefully choose their words on analyst calls, so it's harder to identify actionable insights. The RavenPack EI Transcripts factors streamline this process using the quantitative analysis of earnings call transcripts to produce:
As well as the Transcript Factor, a combination of all the previous factors.
Discretionary and quantitative investors can leverage these factors to:
Sentiment and transparency can be used to filter out stocks with negative outlook.
Research has identified extractable alpha from these signals with holding periods up to 1 month.
The performance of the Transcripts Factor is less focused on short-term market impact but fairly robust over time, with a less pronounced decay as the holding period increases compared to other components. Its performance on cumulative returns is particularly strong for Europe and APAC.
The Factors are the outcome of a multi-step process including:
RavenPack analyzes earnings call transcripts from 20,000+ publicly-listed companies, including 2000+ in Japan, China, Hong Kong, Taiwan, and South Korea sourced by SCRIPTS Asia, and global coverage from FactSet transcripts.
For each event identified in transcripts, RavenPack uses sentiment analysis to compute multiple scores by matching stories usually categorized by financial experts as having a positive or negative financial or economic impact.
Sentiment scores and event volumes are aggregated and smoothed over time with various decays and presented as daily factors, computed using a published methodology.
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