FINANCIAL ANALYSISSEP 28, 2023

AI-Driven Alpha: Quantifying Sentiment

How institutional investors are leveraging large language models to decode central bank communications and earnings calls.

AI-Driven Alpha: Quantifying Sentiment

The deployment of Large Language Models (LLMs) in quantitative finance has moved beyond experimental phases into core production strategies. Our latest survey of 50 top hedge funds reveals that 82% are now using NLP (Natural Language Processing) to interpret central bank minutes before the market reacts.

Sentiment Velocity

It is not just about positive or negative sentiment; it is about the velocity of change. Our proprietary index shows that the speed at which sentiment shifts during earnings calls correlates more strongly with 3-day volatility than the actual earnings surprise itself.

We break down the implementation strategies that separate the leaders from the laggards in this new algorithmic arms race.

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