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Beyond Semantic Analysis: Utilizing Social Finance Data Sets to Improve Quantitative Investment Models

Leigh DrogenEstimize Founder and CEO

New Social Finance Data Sets

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New Social Finance Data Sets

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Wait a minute….

Why is Bloomberg on that slide?

New Social Finance Data Sets

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Did you know that Bloomberg sells access to the entire corpus of its users’ anonymized chat history?

New Social Finance Data Sets

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Please collect your blown minds from the floor now so that we can move on.

Moving Beyond Sentiment and Semantic Analysis

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Moving Beyond Sentiment and Semantic Analysis

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•Proxy for investor attention

•Identifying market influencers

•Larger and more diverse sample sets

•Removing the sell side bias

Academic Studies

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• Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media - Hailiang Chen, Prabuddah De, Jeffrey Hu, and Byoung Hwang

• Crowdsourcing Forecasts: Competition for Sell Side Analysts? - Rick Johnston

• Generating Abnormal Returns Using Crowdsourced Estimates from Estimize - Leigh Drogen and Vinesh Jha

• The Value of Crowdsourcing: Evidence From Earnings Forecasts - Barbara Bliss

Estimize Pre Earnings Drift

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Estimize Pre Earnings Drift

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Estimize Post Earnings Drift

Estimize Post Earnings Drift

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Estimize Post Earnings Drift

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Estimize Post Earnings Drift

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Estimize Notable Estimates

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• Differ from the average estimate by a minimum percentage, or by a minimum standard deviation, reflecting fact that some stocks naturally have less uncertainty built into their estimates.

• If stock’s earnings have previously deviated significantly from expectations, Notable Estimate must be even more differentiated - as these companies are likely to report farther away from the crowd’s expectations.

• Estimate must be made at least five days in advance of expected earnings in order to be considered Notable.

• Contributor must have a strong track record of providing accurate earnings estimates to Estimize within the sector.

Stock Groupings

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• GICS industry and sector groupings are generated based on how companies produce revenue.

• While sell side analysts organize along these lines, the vast majority of market participants do not.

• Social finance platforms like Estimize, SeekingAlpha, StockTwits or Twitter allow users to contribute across whatever stocks they wish.

• By looking at the overlap in these stocks we are able to create higher correlated groupings.

• These groupings can be used as an alternative risk factor when constructing portfolios.

Investor Attention Proxy

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• Social finance platforms give an opportunity to measure what investors are looking at and talking about, enabling us to measure several heuristics including information availability.

• The immediate price and volume reaction to a firm’s earning surprise is much stronger, and the post-earnings announcement drift is much weaker for firms with crowd following.

• Higher levels of trading volume surrounding earnings announcements for firms that have an active investor following.

• Rise and decline in investor attention on other platforms (OpenFolio, Slingshot Insights, StockTwits) may provide similar insights.

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Thank you!

L@estimize.com