Taking into account post-earnings announcement drift and the pricing of beta portfolios, Refinitiv analysts look at how trailing news sentiment can be incorporated into investment strategies.
It is well understood that large swings in price, volume and volatility can occur on the initial reporting of extreme sentiment news stories. Markets react quickly to new information, however, and any initial reaction can be difficult to profit from for all but the lowest latency investors. Often, more important for longer-term investors are the secondary movements following the initial price reactions.
We can consider whether or not the market generally underreacted or overreacted to new information and whether to expect price drift or reversion in the coming hours, days or weeks.
This paper seeks to analyze identified mis-pricings and anomalies and if they provide customers a valuable way to utilize the Refinitiv News Analysis data. Specifically, the paper looks at two of the more interesting results involving post-earnings announcement drift and the pricing of beta portfolios.
Access the full report to find out:
- How to use Refinitiv News Analytics to profit from earnings surprises.
- How post-earnings announcement drift reacts when earnings surprises are in line with underlying market sentiment.
- How market-wide news sentiment has a role to play in the pricing of risk assets.