Dynamic Rotation Between Megatrends
By MKT MediaStats Research Team
September 9, 2022
Thematic investing has gained significant attention in the asset-management industry. These notes introduce a tactical allocation analysis designed for MSCI megatrends indices. The first note focuses on indicator construction showing a method by which scores are derived from media articles sourced from approximately 100K individual sources, designed to capture time-series and cross-sectional shifts of investor attention and sentiment toward MSCI megatrends.
The second note also shows that megatrends with high MediaStats Megatrend Scores (MMS) have high future returns. A portfolio that longs the top six megatrends based on MMS yields a Sharpe ratio of 1.23 (using returns in excess of a portfolio invested equally in all 24 MSCI megatrends) from March 2014 to May 2022. The results highlight the usefulness of media-derived measures for dynamic theme rotation strategies.