News cycle and securities lending data boost returns
08 November 2011 London
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By analysing "abnormal levels" of news coverage and short selling data on stocks, asset managers can increase returns, particularly during times of fragile investor confidence, says Data Explorers.
Research shows that enhanced annualised excess returns of 25 to 30 per cent can be obtained by using news flow and short selling signals in combination. The hybrid strategy calls for using media sentiment to identify areas of the market exhibiting "herd-like" behaviour and then following short selling trading trends.
As a case in point, Knightsbridge Asset Management has used news data from aggregator, RavenPack News Analytics alongside US equities short selling data from Data Explorers to assess behavioral trends and market neutrality.
"Knightsbridge designed strategies to take advantage of out-of-favour and in-favour segments of the market by isolating stocks experiencing abnormal levels of media coverage (both negative and positive) and short selling (heavy or light). The portfolios were dynamically rebalanced in order to emphasize positions at extreme ends of the news sentiment and short interest spectra," explains Data Explorers.
Research shows that enhanced annualised excess returns of 25 to 30 per cent can be obtained by using news flow and short selling signals in combination. The hybrid strategy calls for using media sentiment to identify areas of the market exhibiting "herd-like" behaviour and then following short selling trading trends.
As a case in point, Knightsbridge Asset Management has used news data from aggregator, RavenPack News Analytics alongside US equities short selling data from Data Explorers to assess behavioral trends and market neutrality.
"Knightsbridge designed strategies to take advantage of out-of-favour and in-favour segments of the market by isolating stocks experiencing abnormal levels of media coverage (both negative and positive) and short selling (heavy or light). The portfolios were dynamically rebalanced in order to emphasize positions at extreme ends of the news sentiment and short interest spectra," explains Data Explorers.
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