The recommendation of financial analysts plays an important role in making investment decisions. The method of constructing a portfolio using such recommendations does not rely on quantitative models instead it relies on research of the analysts and their qualitative views. We explore paradigms of modelling whereby the qualitative research outputs of the analysts are introduced in quantitative models of portfolio construction. In this report, the quality of the analysts research is modelled using exploratory data analysis techniques. The findings are then used to create a model of filters. This method narrows down the choice of the asset universe, thereby improving the results of the asset allocation investment model.
The market data used in this report is stock prices for 83 assets, which are or once were components of the NIFTY 50 stock index. The market data and the analyst recommendations are supplied by Thomson Reuters and the study covers the period from 1 January 2013 to 25 July 2018.
Key Words: Analyst Recommendations; Filters; NIFTY50 Index