Sentiment

What Can We Extract From the Financial Influencers’ Advice?

1.December 2023

Social media are often the main and primary choice of information in almost every area of our lives, and they also influence the financial decisions of retail traders and investors. A lot of people give opinions anywhere on the Internet; some are respected, others are disrespected, some are more well-known, and others obscure. But the power of those people, financial influencers, as a group, is substantial as they create the market sentiment. But what’s the real value of their advice? Can we extract useful information from their opinions?

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Language Analysis of Federal Open Market Committee Minutes

15.September 2023

If there were a Superbowl of Finance for equities, it’d definitely be FOMC (Federal Open Market Committee) meetings. Investors and traders from around the world gather and make their decisions on the brink of releasing a statement and following the press conference. Shah, Paturi, and Chava (May 2023) contribute with a new cleaned, tokenized, and labeled open-source dataset for FOMC text analysis of various data categories (meeting minutes, speeches, and press conferences). They also propose a new sequence classification task to classify sentences into different monetary policy stances (hawkish, dovish, and neutral) and show the application of this task by generating a hawkish-dovish classification measure from the trained model that they later use in an interesting trading strategy.

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Predicting Stock Market Performance with the Global Anomaly Index

22.August 2023

Today’s article focuses on investigating long-short anomaly portfolio return predictability in international stock markets, which often undergo mispricing due to investors’ sentiment. A paper by Jiang, Fuwei et al. (Apr 2023), suggests using the AAIG (Global Anomaly Index), and it examines the ability of the aggregate anomaly index to predict future returns in 33 stock markets. While previous research finds that a high aggregate anomaly measure predicts a low return in the U.S. market, this study further demonstrates that the global component of AAI (aggregate anomaly indices) is the key that drives international return predictability and reveals that the global anomaly index is a strong and robust predictor of equity risk premiums not just in the U.S. market but also in international markets, both in- and out-of-sample, consistently delivering significant economic values.

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Is Gold a Safe Haven? It Depends on the Country

24.March 2023

If you’re a regular reader of our blogs (and we hope you are!), you would not miss that we like to touch macro-economic subjects. One of that never-fading topics is the role of gold as a crisis hedge. The probably most known commodity is a popular choice for a portion of the total portfolio, from small investors to central banks, for various reasons (be it diversification or hedging). So let’s not further delay it, and today we ask: Is gold really a safe haven?

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Avoid Equity Bear Markets with a Market Timing Strategy – Part 3

17.March 2023

In the last third installment, we will finish exploring the world of market timing strategies (see parts 1 & 2). We will focus on yield curve predictors and incorporate all three ideas (price-based, macro-economic, and yield curve predictors) into one final trading strategy that yields an annual return above that of the stock market while doubling its Sharpe ratio and reducing maximal drawdown by two thirds.

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