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Sentiment & Factor Performance

Can Factor Returns Be Improved via Big Data?

Nicolas Rabener
10 min read
3 Feb 2020

SUMMARY

  • Stock sentiment can be aggregated from public sources using a big data approach
  • Results indicate that sentiment has some predictability for short-term factor performance
  • Positive sentiment resulted in higher subsequent returns than negative sentiment

INTRODUCTION

Albert Einstein famously stated that “information is not knowledge”, which is more relevant than ever as the amount of available information is increasing almost exponentially. As a private person, it is simple and instinctive to ignore most information, but many investors believe they need to be continuously updated and informed about the latest developments of markets and companies, which has become somewhat overwhelming compared to the pre-Internet period.

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