Generating Alpha from Pharmaceutical Events using ML & NLP
The stock market reaction to a single pharmaceutical event, such as a drug approval, repositioning, or adverse event, can have a spillover effect. Beyond the effect on the associated company’s stock price, an event may trigger a latent movement in the stock price of other publicly traded pharmaceutical companies. Research suggests that these sympathetic price movements may be a result of common attributes shared by the companies (beyond economic fundamentals), which are embedded in human language. In this piece, we explore how investors could leverage NLP to detect these ‘hidden relationships’ and generate alpha from pharmaceutical stocks.