How to spot the next investing hype, narrative or trend using sentiment analysis

Policy sentiment vs SP500 — www.Alternative-Analytics.com

Which domains?

  • Trends — e.g. crypto, cannabis, solar power etc. Which trend is getting more attention, either positive or negative?
  • Narratives — e.g. Covid-19 news, stimulus news, trade war news. 2020 has shown how a narrative can keep stock markets in its hold. Covid-19 comes to mind. However narratives on stimulus (will it pass or not) might be even more interesting due to the binary nature and direct effect on the stock market.
  • SPACs — SPACs are currently the new interesting kid on the block. They are hard to value especially when there isn't an acquisition target but sometimes rumours move a SPAC value away from its intrinsic value. Sentiment and media exposure without a doubt plays a part in that and keeping track of it can offer interesting opportunities.
  • Sectors — Tech, Industrials, Materials etc. Maybe not the first that domain that comes to mind. However capital flowing to a certain sector can also be influenced by sentiment. Moreover sector rotation is also visible in sentiment.

What metrics do we look at?

  • Exposure of one topic compared to another topic — Eg the exposure of Tech sector vs Industrials sector
  • Exposure of a topic over time — E.g. is the US-Chinese trade ware getting more or less exposure?
  • Sentiment of one topic compared to another topic — Eg the sentiment level of one SPAC vs a comparable SPAC
  • Sentiment of a topic over time — Eg is Covid-19 news getting more positive?

Some real life examples

Excerpt from the Alternative-Analytics.eu trend report — Trend reports — Alternative Analytics (alternative-analytics.eu)

Covid-19 and the financial policy

Excerpt from the Alternative-Analytics.eu trend report — Trend reports — Alternative Analytics (alternative-analytics.eu)

Trend investing — Crypto and Cannabis

Excerpt from the Alternative-Analytics.eu trend report — Trend reports — Alternative Analytics (alternative-analytics.eu)

Some final words

--

--

--

Hoping to add some creative ways of looking at quantitative finance

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Top 6 Free ML Data Prep Tools of 2022

Which data visualization tool/software to use?

Obayashi Corporation-The Buffettology Workbook

Dinic’s Algorithm

The Problem with Using Multiple Linear Regression for Key Driver Analysis: a Case Study of the Cola…

Data science interview questions

Creating Custom Sankey Diagrams Using R

Data Modeling Fundamentals

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
AlternativeAnalytics

AlternativeAnalytics

Hoping to add some creative ways of looking at quantitative finance

More from Medium

Britannia: Time To Make Your Portfolio Stronger!

A new quantitive way to look into the forex market as energy frequency and vibration.

How to Trade (for free) in the Stock Market

My First $100 Investment in Stock Market on GRAB