New TenderAlpha Case Study: The Predictive Value of Government Receivables for Stock Price Movements

TenderAlpha has just completed a new case study, titled Evaluating the Predictive Value of US Government Receivables Contract Data for Stock Price Movements

In it, we show that information about government contract awards is not immediately incorporated into stock prices and can be used to construct trading signals to purchase shares of major suppliers to the US government.

To quantify the value of public procurement data, we conducted two separate backtests involving:

  • 10 prominent aerospace and defense government suppliers 
  • 13 large government contractors in the IT, Industrial, Construction, Healthcare, Insurance, and Services sectors

In the first backtest, our analysis compared the performance of ten US Defense and Aerospace stocks against the performance of the SPDR S&P Aerospace & Defense ETF (trading symbol XAR), with the ultimate goal of using TenderAlpha’s government receivables data to outperform the benchmark. 

The results showed that over the January 2012 - September 2022 period, our strategy had produced 4,856 buy signals in the Aerospace & Defense sector, with an average alpha per trade of 3.11%.

For the second backtest, we compared the performance of 13 large government contractors operating in the IT, Industrial, Construction, Healthcare, Insurance, and Services sectors against the performance of the SPDR S&P 500 ETF Trust (trading symbol SPY), again with the objective of using government receivables data by TenderAlpha to outperform the benchmark.

The strategy produced 5,836 buy signals among large government contractors, with an average alpha per trade of 2.36%.

Want to learn more about using government receivables as a trading signal? Reach out today to receive your free copy of our latest case study.

You can also refer to one of our most popular blog posts discussing other quantitative trading strategies based on alternative data

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