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Evaluating a news‐aware quantitative trader: The effect of momentum and contrarian stock selection strategies

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  • Robert P. Schumaker
  • Hsinchun Chen

Abstract

We study the coupling of basic quantitative portfolio selection strategies with a financial news article prediction system, AZFinText. By varying the degrees of portfolio formation time, we found that a hybrid system using both quantitative strategy and a full set of financial news articles performed the best. With a 1‐week portfolio formation period, we achieved a 20.79% trading return using a Momentum strategy and a 4.54% return using a Contrarian strategy over a 5‐week holding period. We also found that trader overreaction to these events led AZFinText to capitalize on these short‐term surges in price.

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  • Robert P. Schumaker & Hsinchun Chen, 2008. "Evaluating a news‐aware quantitative trader: The effect of momentum and contrarian stock selection strategies," Journal of the American Society for Information Science and Technology, Association for Information Science & Technology, vol. 59(2), pages 247-255, January.
    • Handle: RePEc:bla:jamist:v:59:y:2008:i:2:p:247-255
    DOI: 10.1002/asi.20739
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    1. Dey, Asim K. & Hoque, G.M. Toufiqul & Das, Kumer P. & Panovska, Irina, 2022. "Impacts of COVID-19 local spread and Google search trend on the US stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 589(C).

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