For a given portfolio of stocks over a given time period, analyze the delta (difference) between Estimize Estimates and Wall Street Estimates 1-day before earnings releases. For deltas in the top X percentile of deltas, normalized by stock (and / or market cap, industry, sector) simulate increasing exposure by X% for a given drift period (increasing exposure = purchasing stock).
At the end of the drift period, unwind the increased exposure (sell stock to return to original position) and calculate the profit or loss as drift return. For deltas in the bottom X percentile of deltas, normalized by stock (and / or market cap, industry, sector) simulate decreasing exposure by X% for a given drift period (decreasing exposure = selling stock). At the end of the drift period, unwind the decreased exposure (purchase stock to return to original position) and calculate the profit or loss as drift return.
Model Parameterization
Underlined terms in the model description represent variable model inputs which should be analyzed, optimized, and ultimately parameterized.
Model Performance
Compare the portfolio return of the model (model return) to the portfolio return without the model (benchmark). Optimize the model to maximize the model return.
Sample Solution