AUTHOR=Taguchi Rei , Watanabe Hikaru , Sakaji Hiroki , Izumi Kiyoshi , Hiramatsu Kenji TITLE=Constructing Equity Investment Strategies Using Analyst Reports and Regime Switching Models JOURNAL=Frontiers in Artificial Intelligence VOLUME=5 YEAR=2022 URL=https://www.frontiersin.org/journals/artificial-intelligence/articles/10.3389/frai.2022.865950 DOI=10.3389/frai.2022.865950 ISSN=2624-8212 ABSTRACT=

This study demonstrates whether analysts' sentiments toward individual stocks are useful for stock investment strategies. This is achieved by using natural language processing to create a polarity index from textual information in analyst reports. In this study, we performed time series forecasting for the created polarity index using deep learning, and clustered the forecasted values by volatility using a regime switching model. In addition, we constructed a portfolio from stock data and rebalanced it at each change point of the regime. Consequently, the investment strategy proposed in this study outperforms the benchmark portfolio in terms of returns. This suggests that the polarity index is useful for constructing stock investment strategies.