Make money doing the work you believe in
A Sharpe of 2.26. Just from reading earnings call transcripts.
A new paper uses chronologically consistent LLMs (no look-ahead bias) to turn 168,139 earnings calls into a single scalar signal (EAR_AI), and the results are striking:
1.73% monthly long-short return spread
Sharpe of 2.26, robust across every size group (even mega-caps)
Subsumes classical PEAD measures (earnings & revenue surprises)
Predicts future earnings surprises, R&D growth, CapEx, and leverage
Distinct from 125 factor-zoo characteristics, combining it with a ridge SDF lifts Sharpe from 1.45 → 2.7
The mechanism is clean: EAR_AI is a denoised version of the earnings announcement return that isolates forward-looking content from the text. The alpha shows up specifically in firms whose future earnings confirm the signal: it's putting you on the right side of fundamentals before they're realized.
Even better, analysts seem to incorporate this content into their forecast revisions, and the returns aren't explained by aggregate sentiment (so it's not a behavioral mirage).
