An NLP sentiment signal shows excellent paper Sharpe but collapses…

Question

An NLP sentiment signal shows excellent paper Sharpe but collapses when scaled. What was MOST likely under-modeled?

Accepted Answer

Market impact, capacity, and liquidity constraints that make the signal non-scalable at target AUM. — Great paper Sharpe that dies live usually forgot capacity, impact, and liquidity.

Answer

GPU spot pricing only.

Answer

The font used in research PDFs.

Answer

Office snack inventory.

An NLP sentiment signal shows excellent paper Sharpe but collapses when scaled. What was MOST likely under-modeled?

Short Explanation and Infographic

Full Explanation