As any veteran market participant will tell you, risk management at its core involves being able to quantify a risk so that you can mitigate it to an acceptable level given your risk appetite. You want to take on the right amount of risk at the right time. Too little risk can hurt expected returns, but too much risk can hurt (a lot).
Including corporate events data in your risk analysis can help you better minimizing risk exposures.
Because volatility often occurs around corporate events.
What Exactly Constitute Corporate Events?
Although a broad category of data, in general corporate events include:
Earnings – announcement dates, any changes to the date or time of an earnings announcement, shareholder calls, and any future earnings dates.
Dividends – the announcement of a dividend, suspension or resumption of a dividend, and increasing or decreasing a dividend.
Corporate Actions – buybacks, mergers & acquisitions, secondary offerings, shareholder & board meetings, spinoffs, stock splits, etc.
Investor Events – investor conferences, or any event where a company executive will be making remarks.
Product Related Events – a movie release by a studio, a failed drug approval for a pharmaceutical company, etc.
Corporate Events Offer Unfiltered Information About a Company.
Corporate events data can be very powerful because it comes directly from the company itself, the SEC, or the event organizer (e.g. conference organizer). It is not filtered by a third party – it is the company divulging information about itself.
So you need to know when such corporate events will happen, and stay abreast of any changes to the date/time or content.
For example, if a company postpones its earnings announcement by a week, it typically means weak results. Conversely, if a company moves up its earnings announcement, it is likely about to disclose better-than-expected results. How often do companies change the timing of their earnings announcements? More often than you might think. Looking at DIH’s corporate events data, just shy of 10% of companies did so in 2020.
Armed with this information, you can better prepare for any resulting risk events.
How Firms Use Corporate Events Data.
Corporate events data is not just for Risk Managers. It can also be used by a wide variety of market participants for a myriad of tasks:
It is important to note that it’s not enough to just have corporate events data -- you need to understand the frequency and power of each data point in your analysis.
For example, what if a regularly scheduled event (e.g. quarterly earnings report) is not confirmed by the company in a similar date range as it has typically been in the past? It could mean the company is more likely to delay their earnings date, and doesn’t indicate confidence in what is to be shared on its earnings conference call.
Corporate events data can be a powerful input to your models, and help you improve outcomes.
What about you? Are you incorporating corporate events data in your models? I’d love to hear your thoughts.
Also, please connect with DIH on LinkedIn and Twitter.
Tom Myers is the founder of Data In Harmony (DIH), who offers complete & accurate financial data that is globally sourced, reliably delivered under user-friendly license terms, and for a price that fits your budget. DIH also provides a wide variety of alternative data, as well as data engineering tools.