The Handbook of News Analytics in Finance

6.9 SUMMARY AND AREAS FOR ADDITIONAL RESEARCH

We have shown that there is exploitable alpha in news. News analytics produce results superior to naive “buy on the good news, sell on bad” strategies. This is shown in both event studies and historical portfolio simulation.

6.9.1 Directions for future research. Is this just for quants?

The effect of these stringent filters is to reduce the firehose of news events to a much smaller flow of significant events. In this work, we have focused on quantitative machine-driven approaches using those events as signals.

Modern visualization and information extraction tools, relatives of the Event Study Explorer shown here, deliver this information in a way that is useful for judgment-driven fundamental investing as well. Protoype systems based on “sentiment indices” calculated across countries, sectors, capitalization classes, and styles can act as intelligence amplification (IA) tools for investors of all flavors.

In the quant sphere, this study has only scratched the surface of what can be done with the RNSE feed. Even restricting one's attention to “slow” alpha, accumulating over days to months, the RNSE feed provides an incredibly rich array of features from which to build detectors for longer term arbitrage opportunities.

Intentionally omitting portfolio construction techniques and “pre-news” analysis, the following are among the research projects that the authors find most compelling using RNSE output as source data:

• Sentiment surprise ...