Selecting Stock Events with Excess Returns, IC, and t-Statistics

Summary

This report describes a multi-factor event rotation approach for finding stock-related events that may be attracting market attention. It considers events involving shareholder behavior, dividend policies, earnings forecasts and growth reports, and private placements. The strategy aims to hold stocks associated with the selected events.

It ranks event factors using three measures: recent excess returns, the absolute information coefficient (IC), and the absolute t-statistic after accounting for selected factors. The report says the measures are considered together to select event factors and group stocks. Its reported results are positive annual absolute and excess returns, averaging about 15%, with information ratios stronger in broadly rising markets. The report characterizes the approach as tilted toward market momentum. The supplied text gives no detailed test period, benchmark, transaction costs, or calculation specifications, so the performance claims cannot be independently assessed from this summary alone.

Key ideas

• The strategy searches for active stock events across several corporate and shareholder categories.
• Event factors are ranked using recent excess returns, absolute IC, and absolute t-statistics.
• The selected event factors are used to form groups of related stocks.
• Reported information ratios were stronger in rising markets, suggesting exposure to market momentum.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.