As if venture capital funding wasn’t enough, the investment community is pouring money into the effort to discover new signals that, if properly analyzed, will predict future stock prices, or so the investors hope. Some of the signals being explored include frequent auditor changes, sentiment analysis of CEO public statements and social network comments, to name just three.
Below is an excerpt from a Bloomberg article covering the news:
“In less than a decade, Danske Bank A/S changed auditors four times before a $230 billion money-laundering scandal hammered its share price.
It’s those type of red flags that PanAgora Asset Management Inc. wishes its factor-investing models could capture. So now it’s trained them to. The Boston firm has programmed robots to look beyond financial statements and market prices, trying to adapt cutting-edge data science to a brand of quant trading that before now had little use for it.
‘We want to buy good-quality companies that are going to grow at a reasonable price,’ said George Mussalli, a chief investment officer at the $46 billion manager. ‘But the question is how do you define that, and those definitions need to evolve over time.’
Statistical-arbitrage shops and macro funds have spent millions for exclusive data to uncover sources of consistent returns. Stock pickers famously count cars parked outside Walmart or track oil tankers to inform trades…”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
