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How to Integrate Alternative Data into Factor Investing

Hedge fund managers need to adopt innovative trading strategies to succeed in 2022.

Factor investing, a cornerstone strategy for decades, is evolving. A recent report published by Dimitris Melas in the Journal of Portfolio Management concludes that incorporating factors continues to be relevant. Today, factor investing includes innovative new ideas, such as the use of alternative data.

Technology, like natural language processing and machine learning, scans and analyzes regulatory filings, news reports, social media, and other sources of intelligence. The data is used to identify investment ideas and trending themes. These alternative datasets are essential in factor investing in 2022 and will continue to be more central in the future.

As one of the world’s leading alternative data providers, TipRanks provides alternative data to leading quant funds. These are three of our most popular datasets.

SMART SCORE

This data-driven stock score assesses stocks on eight market factors.

The Smart Score is built using artificial intelligence and generates a single score that evaluates a stock without human intervention. The score indicates whether current market factors indicate that a stock is showing Outperform, Neutral, or Underperform potential. We have back-tested this strategy since 2016 and discovered that stocks with a maximum Smart Score have outperformed the S&P 500 by 73% since 2016. The score incorporates six alternative datasets, as well as technical and fundamental analysis.

Market Coverage: 14,536 U.S., 2,024 Canadian 2,883 UK stocks
Update Frequency: Daily
Coverage Start Date: July 2016

TIPRANKS EXPERT SENTIMENT SIGNAL (TRESS)

A daily stock sentiment score based on the opinions of XXX financial experts.

The TRESS signal measures the sentiment of contributors to leading financial blogs and provides a quick indication of which stocks are receiving very bullish or bearish reviews. It provides further accuracy by incorporating recency and source quality.

Market Coverage: 5,000 U.S stocks
Update Frequency: Daily
Coverage Start Date: January 2010

CORPORATE INSIDERS

Real-time coverage of the buy and sell transactions of over 81,000 corporate insiders.

TipRanks’ technology scans SEC Form 4 and Form 3 submissions and classifies transactions associated with the relevant insider, differentiating between ‘informed’ trades that indicate sentiment and ‘uniformed’ transactions that don’t indicate sentiment.  

Market Coverage: 8,171 U.S., 1,800 Canadian, 1,249 UK stocks
Update Frequency: FTP- hourly API- real-time
Coverage Start Date: July 2016

ABOUT TIPRANKS DATA

TipRanks powerful technology scans millions of analyst reports, financial blogs, news publications, SEC submissions, and company filings. All of our datasets are tested, licensed, and trusted by some of the world’s largest quantitative, multi-strategy, and discretionary funds.

The data is delivered either via REST API or FTP, recorded point-in-time and mapped to a specific stock ticker with a time stamp. Corporate action is analyzed and fitted for backward compatibility.

Free trials of all datasets are available upon request, please contact us at sales@tipranks.com.