A US-based hedge fund.
Our client wanted to develop an analyst ranking model to identify how analyst crowding could be used systematically to assess stock performance.
Considering the specifics of our client's business model and investing strategy, we deployed a multi-step process:
Downloaded all historic revision of the analyst ranking from Bloomberg and Reuters
Created a scenario of analyst ranking dates R and stocks reaction on R+1, R+2 and R+n days
Identified correlations and number of holding days for analysts, who were top-ranked for respective stocks
Developed a highly proprietary technology and models of crowd behavior
The model was maintained and used by the hedge fund to deploy capital, whenever there was a ranking change
SG Analytics delivered a model that was completely non-correlated with the hedge funds existing model.
The model enabled the client to track their existing portfolio.
The hedge fund could take overweight positions on certain stocks and underweight position on certain other stocks based on the analyst ranking and SG Analytics backtests.
The proprietary model was used by the hedge fund to take large size positions in new stocks.