Web News Analytics Enhance Stock Portfolio Returns

RavenPack has tested its data set derived from online sources and financial news impact on stock portfolio returns, compared to the real time content published by Dow Jones and Wall Street Journal. The study spread on one week time and has monitored all Russel 3000 constituents.

The paper, available at: SSRN or at: SSRN, demonstrates how mixing premium newswire services with broader web content has a significant impact on increasing return predictability. Adding plenty of web content sources (in this case, digesting over 22,000 online trustable financial news sources) reduced signal turnover and led to an improvement in Information Ratio of up to 70%.

The analysis is focused on verifying if additional new sources have value on their own and whether they complement consecrated, existing sources. There are taken into consideration two news packages RavenPack provides for its users: the Dow Jones Edition, which includes relevant info from Dow Jones Newswire, regional editions of the Wall Street Journal, and Barron’s; and the much more complex Web Edition, which includes more than 22,000 online sources, including financial news, national and local news, blogs, government and regulatory updates.

The conclusion is that both basic and extended packages contain valuable information, but the larger informational edition provides more value for investors. The results are measured through a “company sentiment indicator methodology”, which is presented in detail in the study. The overall analysis proves a strong predictive power for up to 10 days across the Russell 3000 constituents.

The next question is how abundant and quality web news can influence long term investment and trading decisions. The authors are determined to find out the answer in a new study and we are looking forward for it.