Thursday, July 22, 2010

"All hail the (tiny) predictive power of FT Alphaville"

FTA said modestly.
[doesn't FTA have another meaning? -ed]
From Alphaville's MoneyTech series:
We’re not quite sure how to take this particular compliment:
FT Alphaville Disproportionally Interesting Compared to General News in Predicting Stock Returns
That’s from Recorded Future, a young firm specialising in something called “temporal and predictive analytics.”
Essentially, they’ve loaded several years worth of digital news data into their database and are now offering clients the opportunity to query the database for actionable information.
And Recorded Future have discovered something about this particular financial blog that all our regular readers will surely know already:
The results of my experiments prove fairly interesting. In particular, our “big news” signal is statistically significant at the 0.001 level. This indicates that on average, good news on FT Alphaville is associated with 1-week ahead outperformance. Conversely, on average, bad news for a company on FT Alphaville is associated with 1-week ahead under-performance. The same effect is not evident in our database as a whole, indicating that there is something “special” about the news that comes from FT Alphaville....MORE
Here's the series to date: