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I got hold of a data set which contains fundamental data like analyst recommendations/revisions (consensus only) and I am trying to come up with an idea of how this could be used as a trading signal or as an addition to one of my other technical trading signals. From academic research that I have read, it sounds like there is very little informational content in such analyst recs as a stand-alone signal. My holding periods are anywhere between hours to 1-3 days, so I guess it might be better suited for buy and hold long-term strategies in the literature.

My initial idea would be to see if there is generally correlation between analyst publications and price movements (simple spearman/Pearson). The other idea that I got from some papers was, that the biggest correlations to prices happens $t-1$, due to insider information leakage. If I could see bigger moves happen before announcements, then one could leverage this as an entry point for a mean-reversion type strategy. If anyone has any idea how something like this could be done or any other idea about how to use the fundamental data that would be appreciated.

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  • $\begingroup$ I have no experience using fundamental data (I use technical analysis), but my instinct here would be that you need a much larger holding timeframe to take into account the effects of fundamental analysis. Maybe you could start by looking at correlating analyst publications with the stock move over the next 3-12 months? $\endgroup$ Mar 29 at 18:51
  • $\begingroup$ I agree in general, but my holding period would not fit into that framework. My initial guess would have been if anyone trades based on analyst recommendations I would assume to see some movement after the announcements. $\endgroup$ Mar 30 at 6:48

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