Introducing TMI Data Science: Delivering Alpha With Custom NLP-Based Leading Indicators

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>We text-mined the global financial media for mentions of the top 30 MSCI Japan members to find that Japanese equities are back on the agenda in recent weeks, recently trending in strong correlation with MSCI Japan performance relative to the MSCI World</li>
<li>By comparison, news momentum for the top 30 SPX members has been fading since 8/28</li>
<li>Surprisingly, Japanese equity news momentum has been consistently a positive driver of MSCI Japan performance; back-testing suggests this is not the case with SPX, for example</li>
<li>Looking at a broader sample of MSCI Japan members at the sector level (top 15 for each sector), we find that most of the recent "trending" (i.e. news volume increase) has been in industrials and materials; this should be no surprise in light of the recent Japan value rotation and Berkshire Hathaway news</li>
<li>From a sentiment perspective, the recent risk-off phase is showing up in our data - particularly for Japanese industrials, which peaked on sentiment at +1.8x STDEVs just 2 weeks ago and have now turned neutral; though the equities are unfazed thus far</li>
<li>We note that sentiment on the Top 30 MSCI Japan members has been much more stable than the comparable metric on SPX, and has remained positive throughout the recent global correction</li>
<li>Although the resilience of Japanese equities can be attributed to risk-off, the significant drop in correlation in recent weeks is supportive of Japanese equities as a diversifier for global portfolios; we emphasize that the spike in Japanese equity news momentum is absolute - and thus a constructive signal of increasing interest levels</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


We text-mined the global financial media for mentions of the top 30 MSCI Japan members to find that Japanese equities are back on the agenda in recent weeks, recently trending in strong correlation with MSCI Japan performance relative to the MSCI World
By comparison, news momentum for the top 30 SPX members has been fading since 8/28
Surprisingly, Japanese equity news momentum has been consistently a positive driver of MSCI Japan performance; back-testing suggests this is not the case with SPX, for example
Looking at a broader sample of MSCI Japan members at the sector level (top 15 for each sector), we find that most of the recent "trending" (i.e. news volume increase) has been in industrials and materials; this should be no surprise in light of the recent Japan value rotation and Berkshire Hathaway news
From a sentiment perspective, the recent risk-off phase is showing up in our data - particularly for Japanese industrials, which peaked on sentiment at +1.8x STDEVs just 2 weeks ago and have now turned neutral; though the equities are unfazed thus far
We note that sentiment on the Top 30 MSCI Japan members has been much more stable than the comparable metric on SPX, and has remained positive throughout the recent global correction
Although the resilience of Japanese equities can be attributed to risk-off, the significant drop in correlation in recent weeks is supportive of Japanese equities as a diversifier for global portfolios; we emphasize that the spike in Japanese equity news momentum is absolute - and thus a constructive signal of increasing interest levels
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Indicators: Text-Mining Says Japanese Equities Are Trending...Does This Drive Outperformance?