Market Neutral Strategy Using FAANG Stocks

The more anger that analysts expressed on FAANG earnings calls, the higher the next quarter's stock returns.

We have built a basic market-neutral strategy using FAANG stocks:

→ Long the 2 stocks where analysts expressed the most anger.

→ Short the 2 where analysts were least perturbed.

You can view the equity curve below. This is one of the Python notebooks we offer to our LSEG Data & Analytics transcript analytics clients. Please let us know if you'd like a free trial.

Anger on earnings calls may signal that analysts sense management is being evasive or that expectations have been missed. But the stock has already absorbed the bad news, and the emotional overreaction signals opportunity.

Here is one of six case studies we walk through in our LSEG partnership sessions on NLP and AI for investing: https://lnkd.in/gApJyWBg