The document discusses a 2008 journal article that examines how quantifying language in news stories can predict firms' fundamentals and stock returns. It finds that a higher frequency of negative words forecasts lower earnings and brief underreactions in stock prices that correct over time. Words related to fundamentals have the highest predictability. The findings suggest investors quickly incorporate qualitative information from news into stock prices.
APPLICATION OF ECONOMETRICS
it helps u to understand why we study econometrics when im coming to know these application of econometrics my concepts are clear
APPLICATION OF ECONOMETRICS
it helps u to understand why we study econometrics when im coming to know these application of econometrics my concepts are clear
A revision presentation offering ideas for stronger evaluation and analysis in your AS and A2 economics exam papers. Ten strands are suggested for students who want to build really good answers especially to evaluation questions.
According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.
QUALITY ASSURANCE FOR ECONOMY CLASSIFICATION BASED ON DATA MINING TECHNIQUESIJDKP
Researchers in the quality assurance field used traditional techniques for increasing the organization income and take the most suitable decisions. Today they focus and search for a new intelligent techniques in order to enhance the quality of their decisions. This paper based on applying the most robust trend in computer science field which is data mining in the quality assurance field. The cases study which is discussed in this paper based on detecting and predicting the developed and developing countries based on the indicators. This paper uses three different artificial intelligent techniques namely; Artificial Neural Network (ANN), k-Nearest Neighbor (KNN), and Fuzzy k-Nearest Neighbor (FKNN). The main target of this paper is to merge between the last intelligent techniques applied in the computer science with the quality assurance approaches. The experimental result shows that proposed approaches in this paper achieved the highest accuracy score than the other comparative studies as indicates in the experimental result section.
: Security and Portfolio Analysis :Efficient market theoryRahulKaushik108
Key Concepts of Efficient market theory: Very Lucid presentation , very Useful for MBA student to understand the Concepts of Efficient Market theory( Random walk hypotheses ) .The key idea of the hypotheses is" no one can efficiently out predict the market" or in other terms, technical analysis or fundamental analysis can not beat "the naive buy and hold strategy".
A revision presentation offering ideas for stronger evaluation and analysis in your AS and A2 economics exam papers. Ten strands are suggested for students who want to build really good answers especially to evaluation questions.
According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.
QUALITY ASSURANCE FOR ECONOMY CLASSIFICATION BASED ON DATA MINING TECHNIQUESIJDKP
Researchers in the quality assurance field used traditional techniques for increasing the organization income and take the most suitable decisions. Today they focus and search for a new intelligent techniques in order to enhance the quality of their decisions. This paper based on applying the most robust trend in computer science field which is data mining in the quality assurance field. The cases study which is discussed in this paper based on detecting and predicting the developed and developing countries based on the indicators. This paper uses three different artificial intelligent techniques namely; Artificial Neural Network (ANN), k-Nearest Neighbor (KNN), and Fuzzy k-Nearest Neighbor (FKNN). The main target of this paper is to merge between the last intelligent techniques applied in the computer science with the quality assurance approaches. The experimental result shows that proposed approaches in this paper achieved the highest accuracy score than the other comparative studies as indicates in the experimental result section.
: Security and Portfolio Analysis :Efficient market theoryRahulKaushik108
Key Concepts of Efficient market theory: Very Lucid presentation , very Useful for MBA student to understand the Concepts of Efficient Market theory( Random walk hypotheses ) .The key idea of the hypotheses is" no one can efficiently out predict the market" or in other terms, technical analysis or fundamental analysis can not beat "the naive buy and hold strategy".
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The wealth of a nation lies in its people – their commitment to country and community, their willingness to strive and persevere, their ability to think, achieve and excel.
The retina is the light-sensitive layer of tissue that lines the inside of the eye and sends visual messages through the optic nerve to the brain. When the retina detaches, it is lifted or pulled from its normal position. If not promptly treated, retinal detachment can cause permanent vision loss.
When one is dealing with infertility, as much as it is impor-
tant to strictly follow the rules of the treatment, it is equally
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RAF6,4442Review of Accounting and FinanceVol. 6 No.docxmakdul
RAF
6,4
442
Review of Accounting and Finance
Vol. 6 No. 4, 2007
pp. 442-459
# Emerald Group Publishing Limited
1475-7702
DOI 10.1108/14757700710835087
Alternative evidence on financial
analysts’ use of financial
statement information
Donal Byard
Stan Ross Department of Accounting, Baruch College – CUNY,
New York, New York, USA, and
Fatma Cebenoyan
Department of Economics, Hunter College – CUNY, New York, New York, USA
Abstract
Purpose – Financial analysts are frequently viewed as information intermediaries who process and
interpret firms’ financial reports for other market participants. Much recent research, however, has
cast doubts on analysts’ ability to fully utilize the information in firms’ financial reports. Using an
alternative approach, this study aims to provide evidence on how sophisticated analysts are at using
information in firms’ financial reports.
Design/methodology/approach – The paper estimates different measures of firms’ operational
efficiency, all of which are derived from financial statement data, and compares the strength of the
association between these measures and analysts’ absolute forecast errors. It then compares a
sophisticated frontier-based measure of firms’ operational efficiency that evaluates firms’
performance relative to their competitors with three more traditional efficiency measures;
specifically the return on asset (ROA) ratio, industry-adjusted ROA, and the return on equity ratio.
Findings – The results indicate that the more sophisticated frontier-based measure is more strongly
negatively associated with analysts’ absolute forecast errors than the other three measures. The
results thus suggest that analysts are capable of undertaking a sophisticated analysis of the
information in firms’ financial reports, at least as it pertains to operational efficiency.
Originality/value – To the extent that analysts serve as a key group of users of financial
information, these results are likely to be of interest to accounting policy makers.
Keywords Financial reporting, Financial analysis, Accounting information
Paper type Research paper
1. Introduction
Financial analysts play an important role in financial markets, a role that seems to
have increased in importance in recent years. Analysts are frequently viewed as
information intermediaries who gather, process, and disseminate firm information for
investors (e.g. see Schipper, 1991). Indeed, much of the accounting literature views
analysts as sophisticated agents who process or interpret firms’ disclosures for
investors. Consistent with this view, Lang and Lundholm (1996) document that firms
with higher levels of voluntary disclosure attract a larger analyst following.
The view of analysts as sophisticated information intermediaries can, however, be
challenged. A large body of literature provides evidence that analysts do not efficiently
use all the information contained in firms’ past financial reports. For example, DeBondt
and Thaler (1990) and Abar ...
Compose a paper using the five sources attached. The paper should .docxdonnajames55
Compose a paper using the five sources attached. The paper should summarize not PLAGARIZE all 5 articles regarding electronic medical records. APA FORMAT AND USE THE SOURCES GIVEN ONLY. MAKE SURE TO USE INTEXT CITATION FOR THEESE SOURCE. PAPER SHOULD BE 6 PAGES LONG.
Financial Ratio Analysis Worksheet
Your Full Name:
Ahmed Alothman
2011
2010
2009
Basic Rules
Liquidity
Current Ratio
1.50
1.6
1.2
Should be >1.00
Quick Ratio
0.86
0.95
0.6
Good to see close to 1
Leverage
Debt to total asset ratio
0.19
0.19
0.26
Good to see less than 1
Debt to Equity ratio
1.003
1.03
1.35
Smaller is better
Activity
Inventory turnover
7.8
8.3
7
Higher turnover will be better --- Smaller inventory level will increase the turnover!
Fixed asset turnover
3.3
3.2
3.2
Higher turnover will be better --- Smaller fixed assets level will increase the turnover (Productivity of the fixed assets)!
Profitability
Gross profit margin
0.3
0.3
0.3
Higher is better (Lower cost of goods sold or Higher sales will increase the margin) --- Strategic directions (Ex. Focusing on sales quantity or Lean operations)
Operating profit margin
0.06
0.06
0.06
Higher is better – Operational efficiency will be indicated. Better cost structure might increase this margin.
Net profit margin
0.04
0.03
0.03
Higher is better. Total profitability (Corporate profitability). Check the interest expense and Discontinued operations.
Return on total Assets (ROA)
0.06
0.06
0.06
Higher is better. Consider EBIT and portion of total assets. The total sales for each $1 of total assets.
Your own financial assessment / Analyses / Suggestions:
Liquidity of Staples:
Liquidity ratios are used to measures the ability of the company to pay off its current liabilities.
Using current ratio it shows that staples can pay off its current liabilities more than 1.50, 1.6, 1.2 times respectively and still remain with enough. The company is stable in paying off its current liabilities
Using quick ratio Staples can pay off its liabilities 86 percent, 95 percent and 60 percent respectively of its current liabilities.
Leverage of Staples:
Leverage measures the risk level. But for staples, the company's assets are far more than its liabilities thus the company can be able to access loan application since its ability to pay is far better and stronger. The company is less risky.
Staples has a Debt to equity ratio of 1 which means that investors and creditors have an equal stake in the company's assets. Lower ratio shoes a more stable business. Creditors always views a higher debt to equity as risky and the investors have not funded the operations as the creditors have. The company should try and look for ways to reduce on the Debt to equity ratio.
Activity of Staples:
This measures efficiency on how Staples can control its stock. Staples has a very good inventory control system. This company can sell off its inventory more than 7 times in a single year.
T.
Sales Forecasting
Sales forecasting is the process of a company predicting what its future sales will be. This forecast is done for a particular period of time in the near future, usually the next fiscal year. Accurate sales forecasting enables a company to make informed business decisions. Sales forecasting is easier for established companies that have been operating for a few years than for newer companies. Established companies have years of sales records and can base their forecasts on that past sales data. Newly founded companies have to base their forecasts on less verified information, such as market research and competition analysis to forecast their future business.
Why is Sales Forecasting important?
Sales Forecasting gives insight on whether a company should expand, information about cash flow, and the ability to effectively manage its resources. Without forecasting, a company would be unsure of what inventory level to maintain, unsure on how it should allocate resources across the company, and it would have a hard time predicting future success. Forecasting sales is a crucial business practice, because in addition to helping a company allocate its internal resources effectively, having this data is important for acquiring investment capital. Often, investors want to know what a company’s future expected sales are before making an investment.
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Why Emerging Managers Now? - Infusion Global Partners WhitepaperAndrei Filippov
Traditional asset classes appear to offer uninspiring beta returns at present, and recent years’ hedge fund returns have disappointed both in magnitude and diversification benefits, likely reflecting capacity pressures associated with the concentration of AUM and inflows with larger funds. We argue that, by contrast, Emerging hedge funds offer a rich opportunity set with far fewer capacity issues where skilled managers with concrete competitive advantages in less efficient, smaller capitalization market segments can generate better, more sustainable and less correlated excess returns. Emerging managers do involve more investment and operational risk than larger peers; to that challenge we offer some suggestions on a thoughtful and rigorous approach to constructing an Emerging Managers allocation and balancing effective due diligence with scalability.
Analysis insight about a Flyball dog competition team's performanceroli9797
Insight of my analysis about a Flyball dog competition team's last year performance. Find more: https://github.com/rolandnagy-ds/flyball_race_analysis/tree/main
06-04-2024 - NYC Tech Week - Discussion on Vector Databases, Unstructured Data and AI
Round table discussion of vector databases, unstructured data, ai, big data, real-time, robots and Milvus.
A lively discussion with NJ Gen AI Meetup Lead, Prasad and Procure.FYI's Co-Found
The Building Blocks of QuestDB, a Time Series Databasejavier ramirez
Talk Delivered at Valencia Codes Meetup 2024-06.
Traditionally, databases have treated timestamps just as another data type. However, when performing real-time analytics, timestamps should be first class citizens and we need rich time semantics to get the most out of our data. We also need to deal with ever growing datasets while keeping performant, which is as fun as it sounds.
It is no wonder time-series databases are now more popular than ever before. Join me in this session to learn about the internal architecture and building blocks of QuestDB, an open source time-series database designed for speed. We will also review a history of some of the changes we have gone over the past two years to deal with late and unordered data, non-blocking writes, read-replicas, or faster batch ingestion.
Unleashing the Power of Data_ Choosing a Trusted Analytics Platform.pdfEnterprise Wired
In this guide, we'll explore the key considerations and features to look for when choosing a Trusted analytics platform that meets your organization's needs and delivers actionable intelligence you can trust.
State of Artificial intelligence Report 2023kuntobimo2016
Artificial intelligence (AI) is a multidisciplinary field of science and engineering whose goal is to create intelligent machines.
We believe that AI will be a force multiplier on technological progress in our increasingly digital, data-driven world. This is because everything around us today, ranging from culture to consumer products, is a product of intelligence.
The State of AI Report is now in its sixth year. Consider this report as a compilation of the most interesting things we’ve seen with a goal of triggering an informed conversation about the state of AI and its implication for the future.
We consider the following key dimensions in our report:
Research: Technology breakthroughs and their capabilities.
Industry: Areas of commercial application for AI and its business impact.
Politics: Regulation of AI, its economic implications and the evolving geopolitics of AI.
Safety: Identifying and mitigating catastrophic risks that highly-capable future AI systems could pose to us.
Predictions: What we believe will happen in the next 12 months and a 2022 performance review to keep us honest.
Enhanced Enterprise Intelligence with your personal AI Data Copilot.pdfGetInData
Recently we have observed the rise of open-source Large Language Models (LLMs) that are community-driven or developed by the AI market leaders, such as Meta (Llama3), Databricks (DBRX) and Snowflake (Arctic). On the other hand, there is a growth in interest in specialized, carefully fine-tuned yet relatively small models that can efficiently assist programmers in day-to-day tasks. Finally, Retrieval-Augmented Generation (RAG) architectures have gained a lot of traction as the preferred approach for LLMs context and prompt augmentation for building conversational SQL data copilots, code copilots and chatbots.
In this presentation, we will show how we built upon these three concepts a robust Data Copilot that can help to democratize access to company data assets and boost performance of everyone working with data platforms.
Why do we need yet another (open-source ) Copilot?
How can we build one?
Architecture and evaluation
ViewShift: Hassle-free Dynamic Policy Enforcement for Every Data LakeWalaa Eldin Moustafa
Dynamic policy enforcement is becoming an increasingly important topic in today’s world where data privacy and compliance is a top priority for companies, individuals, and regulators alike. In these slides, we discuss how LinkedIn implements a powerful dynamic policy enforcement engine, called ViewShift, and integrates it within its data lake. We show the query engine architecture and how catalog implementations can automatically route table resolutions to compliance-enforcing SQL views. Such views have a set of very interesting properties: (1) They are auto-generated from declarative data annotations. (2) They respect user-level consent and preferences (3) They are context-aware, encoding a different set of transformations for different use cases (4) They are portable; while the SQL logic is only implemented in one SQL dialect, it is accessible in all engines.
#SQL #Views #Privacy #Compliance #DataLake
STATATHON: Unleashing the Power of Statistics in a 48-Hour Knowledge Extravag...sameer shah
"Join us for STATATHON, a dynamic 2-day event dedicated to exploring statistical knowledge and its real-world applications. From theory to practice, participants engage in intensive learning sessions, workshops, and challenges, fostering a deeper understanding of statistical methodologies and their significance in various fields."
1. MORE THAN WORDS:
QUANTIFYING LANGUAGE TO MEASURE
FIRMS’ FUNDAMENTALS
JOURNAL OF FINANCE, 2008
CONVERSATIONS ON FINANCE
PRESENTED BY:
SAHITHI GADDAM | UDIT GUPTA | JOHN LIU | BEEJAL SHAH
2. SHOULD THIS IMPACT STOCK PRICE?
Source: Wall Street Journal (Oct 23, 2014)
4. AGENDA
Part I.
Motivation For The Study
Part II.
Base Paper - Overview
Case Study
Principal Idea Explored
Testing For Predictability Power
Conclusion
Part III.
Discussion on Present Scenario
5. MOTIVATION FOR THE STUDY
(1/2)
Efficient Markets claim
Firm’s Value = Expected [Present Value (Cash Flows)]
Conditional ‘Expectation’ based on Investor’s Information Set
Investor’s Information Set = Quantitative + Qualitative
Abundant literature studying Quantitative information
However, substantial stock price movements are not explained
by quantitative measures (of firm’s fundamentals)
Qualitative information may help explain stock returns
Firm’s business environment, operations and prospects etc.
6. MOTIVATION FOR THE STUDY
(2/2)
Possible advantages from quantifying language
1) Allows researchers to study the impact of limitless variety of
events (e.g. the Microsoft case)
2) May have incremental explanatory power for future earnings
and returns
If analysts’ forecasts and accounting variables are
incomplete or biased
Using Negative vs. Positive words
Literature in psychology
‘Negative’ words, best summarize the cross-sectional variation
in the word list, as compared to other categories
In the following study - primary focus is negative news
7. BASE PAPER - OVERVIEW
Does ‘language’ predict firms’ ‘accounting earnings’ and
‘stock returns’
Major findings:
1) Negative words in firm-specific news stories forecasts low
earnings
2) Stock prices briefly underreact to the information embedded
in negative words, but incorporate fully with a slight delay
3) Negative words in stories that focus on fundamentals – have
highest predictability power (on earning and return)
Findings suggest: Investors quickly incorporate information
on firms’ fundamentals available in linguistic media, into
stock prices
8. PRINCIPAL IDEA EXPLORED IN THE
PAPER
Principal idea explored:
Can a simple quantitative measure of language be used to
predict individual firm’s earnings and stock returns
If yes, then how to quantify the language used in financial new
stories
Unit of Measure (defined in the paper):
Raw metric: 𝑁 =
𝑛𝑜.𝑜𝑓 𝑁𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑊𝑜𝑟𝑑𝑠
𝑛𝑜. 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝑊𝑜𝑟𝑑𝑠
Standardized metric: 𝑛𝑒𝑔 =
𝑁 − 𝜇 𝑁
𝜎 𝑁
𝐌𝐞𝐭𝐫𝐢𝐜 𝐮𝐬𝐞𝐝 𝐚𝐬 𝐢𝐧𝐝𝐞𝐩𝐞𝐧𝐝𝐞𝐧𝐭 𝐯𝐚𝐫𝐢𝐚𝐛𝐥𝐞: 𝒏𝒆𝒈(−𝟑𝟎,−𝟑)
(i.e. treat all news stories in the [-30,-3] trading day period, prior
to an earnings announcement, as one composite story)
9. CONTENT ANALYSIS METHODOLOGY
Research area:
Qualitative analysis; Natural language processing
Content analysis: Two-step process
Word Category Freq. Value
Alleged Negativ 1/29 1
Abuse Negativ 1/29 1
Worse Negativ 1/29 1
Happy Pstv 0/29 1
Neutral Passive 0/29 1
Step 1:
Mapping
Step 2:
Summarizing
Number of negative words
> 99% of all news articles
Example:
10. DATASET
MEASURING NEGATIVITY
Harvard-IV-4 psychological dictionary to categorize
positive and negative words
Around 12,000 words (rows) and 180 categories
(columns)
Measure negativity by negative word frequency
Standardized fraction of negative words per story
Combine all stories per firm for each trading day to
measure frequency
Source: General Inquirer Website
11. DATASET
FIRMS AND STORIES
1980 to 2004
S&P 500 firms
Represent ¾ of U.S. market capitalization
DJNS and WSJ stories
350,000 stories
100,000,000 words
Stories for 95.8% of S&P 500 firms
Center for Research on Security Prices for stock price data
Institutional Brokers’ Estimates System for analyst forecast
data
Compustat for accounting data
Factiva database for news stories
12. MICROSOFT’S CASE STUDY (1/2)
Second sentence: “The alleged ‘pricing abuse will only get
worse if Microsoft is not disciplined sternly by the antitrust
court,’ said Mark Cooper, director of research for Consumer
Federal of America.”
Hypothesis: fraction of negative words relates to effect of
news on market value
Source: Factiva
1999 DJNS article headline:
13. MICROSOFT’S CASE STUDY (2/2)
Source: Google Finance
Fraction of negative words is in 99th percentile of negative
sentences
Microsoft had irregularly low stock returns around news
story
Cumulative abnormal stock return of -42, -141 and -194
bps for the 3 trading days surrounding the news event
14. TESTING FOR PREDICTABILITY POWER
In order to impact stock returns, at least one relationship
must hold:
1) Negative words predict Earnings (proxy for cash flows)
2) Negative words predict Discount Rates (proxy by returns)
OLS regression tests performed
using different dependent variables and control variables
15. TEST 1 - EARNINGS PREDICTABILITY
Dependent Variable: Two measures of quarterly earnings
used
Standardized Unexpected Earnings (SUE)(1)
- Raw metric: 𝑈𝐸𝑡 = 𝐸𝑡 − 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑡
- Standardized metric: 𝑆𝑈𝐸𝑡 =
𝑈𝐸𝑡−µ 𝑈𝐸 𝑡
𝜎 𝑈𝐸 𝑡
Standardized Analysts Forecast Errors (SAFE)
- SAFE =
Median analyst forecast error
σUEt
Control Variables:
lagged earnings, neg-30,-3, size, B/M, trading volume, recent
stock returns (3 measures), analyst forecast revision(2) etc.
Winsorize SUE & all analysts forecast variables at 1% level
Similar results from both ‘SUE’ and ‘SAFE’
Note: (1) Based on Bernard and Thomas (1989), who use a seasonal random walk with trend model for
each firm’s earnings. (2) Using Chan et. al. (1996) methodology.
16. TEST 1 - EARNINGS PREDICTABILITY
MAIN RESULT
All 6 estimates are significant at 99% level
Several control variables also exhibit strong explanatory power, as expected
Predictability is robust even when using ‘before forecasts’ news stories
Note: Table presented above has been truncated, and does not include all control variables. Please
refer to the appendix for complete details.
17. TEST 2 - RETURN PREDICTABILITY
Following two ideas are tested
Return predictability in daily returns
Is there a trading strategy possible off this under-reaction?
Considerations:
Data at daily frequency
Dependent variable: return based on closing price (t=0 & t=1)
Cut-off time: DJNS (up to 3:30pm), WSJ (same day)
Control Variables - Earnings, size, B/M, trading volume, recent
stock returns (5 measures)
18. TEST 2 - RETURN PREDICTABILITY
DAILY RETURNS, MAIN RESULT
neg robustly predicts slightly lower returns on the following trading day
neg coeff. is significant in 4 cases (where DJNS data in included)
Coeff. for DJNS source is higher, as compared to WSJ
Low R2, as expected in efficient markets (< 0.0026)
Note: Table presented above has been truncated, and does not include all control variables. Please
refer to the appendix for complete details.
19. TEST 2 - RETURN PREDICTABILITY
TRADING STRATEGY
Two equal weighted portfolios – constructed by ranking firms on the
basis of positive/ negative news
Long-short strategy, with daily rebalancing
Cumulative raw returns would be 21.1% per year (no trading costs)
Strategy will not be profitable if trading cost is considered
Note: Standard errors calculated using White (1980) heteroskedasticity-consistent covariance matrix
approach.
20. IS THERE A SUBSET OF NEWS
WITH BETTER PREDICTABILITY
Hypothesis:
Negative words in news stories containing word-stem ‘earn’
have better predictability
Results Expected:
Better earnings predictability
Stronger contemporaneous relationship with returns
Magnitude of under-reaction should be greater
21. ADDING NEW INDEPENDENT VARIABLES
Regression (similar to previous case):
Add 2 new independent variables to capture specific effects
‘Fund-30,-3’: words in stories containing word-stem ‘earn’,
divided by total words across all stories
Interaction term: neg-30,-3 * Fund-30,-3
Not
News Stories
Not “About” Firm
Fundamentals
“About” Firm
Fundamentals
neg-30,-3
Fund-30,-3
22. REPEATING REGRESSIONS WITH
TWO ADDITIONAL VARIABLES
Coeff. of both new terms is strongly negative and significant
Interaction: negative words in earnings-related stories are much better predictors
Note: Tables presented above has been truncated, and does not include all control variables. Please
refer to the appendix for complete details.
Strong contemporaneous relationship exists
5x larger response from negative words in earnings-related stories
23. CONCLUSION
More than ‘negative’ words
Contain valuable information
Forecast low earnings
Return Predictability
Slight delay in reaction to negative news
Predictability in t+1 day return
‘Simple’ trading strategy does not exist
Words from specific type of news carry more information
Negative words from earnings related stories are better
predictors
24. POWER OF SOCIAL MEDIA:
THE HASH CRASH INCIDENT
Demonstrated social media’s potential to move markets
Dow Jones fell more than 150 points, the price of crude oil
plummeted, and US bond yields dropped, briefly wiping $121
billion off the value of companies in the S&P 500 index, before
recovering minutes later
25. 1. ‘SNTMNT’- OVERVIEW
Launched an API to monitor Twitter-based stock sentiment
World’s first API that makes predictions based about future stock
price movement for all stocks in the S&P 500
Accuracy as high as 60%, averaging at 54% (company estimates)
Should traders rely on Twitter sentiment alone for their trades?
Signal-to-noise ratio on social media channels is too low to provide
standalone trading signals, but definitely high enough to provide
an innovative trading indicator
Based on work of Professor Johan Bollen, an academic who found
correlations between the stock market and activity on Twitter
27. 2. SOCIAL MARKET ANALYTICS -
METHODOLOGY
Social Market Analytics produces a family of metrics, called
S-Factors – designed to capture the signature of financial market
sentiment
SMA applies these metrics to data captured from social media
sources to estimate sentiment for indices, sectors, and individual
securities
28. SOME USEFUL ONLINE RESOURCES
IBM’s Watson and the Jeopardy! Challenge:
https://www.youtube.com/watch?v=P18EdAKuC1U
Free online course on ‘Natural Language Processing’,
offered on Coursera by Stanford University:
https://www.coursera.org/course/nlp
General Inquirer website:
http://www.wjh.harvard.edu/~inquirer/
IBM Publications:
http://researcher.watson.ibm.com/researcher/view_group.
php?id=147
List of words in spreadsheet format:
http://www.wjh.harvard.edu/~inquirer/spreadsheet_guide.
htm
Princeton’s WordNet: http://wordnet.princeton.edu/
29. REFERENCES
Tetlock, Paul C., Maytal Saar-Tsechansky, and Sofus Mackassy.
2008. “More than words: Quantifying language to
measure firms’ fundamentals.” The Journal of Finance 63
Issue 3 p. 1437-1467.
“Welcome to the General Inquirer Home Page.” Web. 6 April
2015. < http://www.wjh.harvard.edu/~inquirer/
spreadsheet_guide.htm>.
30. QUESTIONS AND DISCUSSION
Can you think of other examples in which any news had an
impact on returns?
Do you think big firms are using such analysis for alpha
generation?