Backtesting psychometric profiling data

Daryl Smith, CFA, Head of Research (London)

Neudata Intelligence
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We summarise key findings from a backtest using an alternative data provider’s cognitive data scores and shareholder returns. Scores were sourced from statements made by company executives on quarterly earnings calls. In short, the backtest supports the view that higher than trend value scores are likely to precede shareholder gains.

This alternative data provider has attempted to analyse the relationship between cognition values and shareholder returns. In short, the group have attempted to build inferences about how senior managers are likely to act, using cognition data. Put simply, this measures the extent to which a target (e.g. a CEO) holds a simplistic, one-dimensional world view, or one that includes diverse perspectives and varied information sources.

Unlike most sentiment analysis tools, cognition data is not calculated by counts of the words used, linguistic constructs employed, or semantic features. Instead, it uses a mapping of the conceptual dimensions expressed in the text of communications to access the underlying construct.

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In this backtest, c.100 companies were analysed across a period spanning

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