6.8 Discussion of RNSE and portfolio construction
We have shown that it is possible to capitalize on news by looking at days on which a
large amount of novel, very polar news occurs. The simulation is relatively uncon-
strained by the standards of institutional portfolios, to allow the signals to drive the
process. Further increases in performance (and reductions in risk) can be implemented
by
.Incorporation of quantitative price, volatility, and volume analtyics The human reac-
tion to complicated, important news is conditioned by the market environment in
168 News and abnormal returns
Figure 6.20.Monthly average percent of NAV long and short for extreme sentiment simulation.
Figure 6.21.Monthly portfolio beta for extreme sentiment simulation.