LONDON, July 20, 2021 /PRNewswire/ -- In their latest quantitative research published today, Acuity Analytics share their recent findings on the use of a macroeconomic factor model for stock returns using news sentiment data.
The report titled, 'News Sentiment Factor Models for Asset Returns' compares the use of factor models in estimating the covariance of capital asset returns. In particular, the paper studies the Fama-French 3 Factor Model and the extent to which Acuity's news sentiment data can be used to enhance this widely used model or emulate its capability in gauging the outsized returns of an investment portfolio as an independent metric.
One of the key results from the study is that the experiments have proven that a 2-factor model comprising the SP500 index returns and one of Acuity's news sentiment market index is as good an estimator of covariance of capital asset returns as the Fama-French 3-factor model.
Professor Argimiro Arratia, who heads up the team of academics at Acuity commented, "We were extremely excited to see the very positive results of this study. The Fama-French 3-factor model has been used extensively by researchers and investors since its origin in 1992 but like any model, has its limitations. With access to so many new data sets today, we are continually looking at ways to incorporate these innovative data sets to enhance these existing models or, even better, identify how they can be used independently to deliver similar, if not potentially better results."
The publication of this study comes just 4 weeks after the official opening of Acuity Analytics in Spain and their R&D Hub.
Andrew Lane, CEO of Acuity says, "The research that Professor Arratia and his team are conducting is very exciting and demonstrates the tangible value that news sentiment data can offer investors. The opening of our R&D hub in Spain is key to harnessing this research capability as a means to expand the uses of our news sentiment data and shape the future of our products."
NLP, AI, opinion mining, volatility monitoring and sentiment analysis are all areas of research for the Acuity Analytics team as they strive to unlock new trading insights on the workings of the financial markets. By testing and unravelling complex, large-scale unstructured data, Professor Arratia's team are helping Acuity to remain at the forefront of data technology and deliver exciting products to investors who are continually seeking new opportunities to make returns.
SOURCE Acuity Trading