How Did Sentiment Factors Perform in Different Regions?

Howard Zhang

Sentiment factors attempt to measure various groups’ views on a company. Sentiment can be measured in many ways and from a wide variety of data sources. Many measures of sentiment are estimated from data on the actions of informed market participants such as short sellers, options traders, sell-side analysts and company insiders. Other measures can be derived from analyzing text in news and other media, or from the behavior of consumers. Using MSCI FactorLab, we examined the performance of various sentiment signals across regions.

At the end of each month, we rank all stocks in the universe by their signal exposures in ascending order. Then we split all stocks into deciles, each containing 10% of the stocks in the universe. Finally, we simulate an equally weighted portfolio for each decile, calculate the portfolio return for the following month and plot the cumulative return of the spread between the top and bottom decile. Source: MSCI FactorLab.