The Wiley Finance Series : Handbook of News Analytics in Finance

226 News and abnormal returns

Table 8.2.

Backtest summary statistics (daily, 2001–2009)

Annualized Annualized Annualized Annualized Information Maximum Turnover Hit rate Average

return

return

return

volatility

ratio

daily

(long–short)

number of

(top basket) (bottom basket) (long–short) (long–short) (long–short) drawdown

stocks per

(%)

(%)

(%)

(%)

(%)

(%)

(%)

basket

Earnings momentum

3.6



4.0

7.6

11.6

0.66



3.3

3,933

52

43

strategy

News momentum (all)

7.3



7.2

14.5

7.8

1.85



2.8

2,463

56

65

News momentum

10.3



6.4

16.7

9.5

1.77



3.8

2,646

56

44

(accounting-related)

News momentum

4.3



8.5

12.8

9.5

1.35



4.2

2,835

54

48

(strategic)

Combining earnings and 11.0



12.7

23.7

16.2

1.47



6.0

54

22

news momentum

a

Contrarian strategy

b

8.0



7.6

15.6

8.3

1.87



2.9

55

41

a

Buy companies with positive news and strong analyst sentiment and sell companies with negative news and poor analyst sentiment.

b

Buy companies with positive news though poor analyst sentiment and sell companies with negative news though strong analyst sentiment.

Source: Ravenpack, Factiva, FactSet, Macquarie Quant Research.