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Evaluating the Performance of Benzinga-Provided Stock Ratings as Trading Indicators

Ashok Arun*, Jovan M. Tadić, Robert Assaly, Kalea Gore

With approximately 25 million readers a month, Benzinga has grown into one of the largest providers for actionable information on capital markets. This information can be utilized in practical trading in multiple ways. In this paper we: 1) Explore the effects of Benzinga-generated analyst rating and rating revisions, 2) Construct a trading indicator by combining information from Benzinga-provided prior and current ratings used in conjunction with prior and updated price targets, 3) Rank the individual performance of all Benzinga-covered research firms and individual analysts between 01/01/2021-12/31/2021, and 4) Compare the simulated trading results using various trading strategies based on the constructed indicators. We defined three indicators with differing enter criteria and measured the success of rates for overall research firms and individual analysts. After testing the efficacy of these three metrics, we find that several indicators could be used in trading. Furthermore, we test and find that there is extra information conferred in the distance from the target from the current price, as well as whether the change in rating is “consensus” vs. “first mover”. Overall, Benzinga-provided ratings were found to be useful indicators in practical trading.