Analyst Sentiment: From factor to indexation
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Two years ago, we discussed analyst sentiment as a systematic factor and demonstrated that revisions in analyst expectations carried a distinct and persistent return premium, which was not explained by other style factors. Since then, the macroeconomic landscape has changed materially: Real policy rates have risen, geopolitical frictions and trade policy turmoil have caused uncertainty, and exposure to the gen-AI boom has widened valuations and return dispersions. Against this backdrop, we revisit analyst sentiment with two objectives: To assess the out-of-sample robustness of the specific analyst-sentiment signal we evaluated in a very different regime and to provide a deeper historical yardstick for investors evaluating the newly launched MSCI Analyst Sentiment Index series.
This paper shows that analyst sentiment has remained a valuable and resilient factor. For both institutional and wealth investors, it broadens the roster of tools available within asset allocation programs, supporting smoother performance, stronger diversification and improved alpha potential.
Data from Dec. 30, 1994, to June 30, 2025. Annualized average excess returns of decile portfolios over the returns of MSCI GEMLT estimation universe (MSCI ACWI IMI). Stock returns are equally weighted.
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