Listening Between the Lines: Active ETFs Bet on Pre-Call Tone

Earnings season kicks off in the coming days. PepsiCo leads the way, with major banks reporting soon after. Historically, financial advisors seeking fundamentally focused active equity strategies relied on mutual funds. The downside? Delayed portfolio disclosures made it nearly impossible to observe manager positioning ahead of major catalysts like earnings.However, the rapid rise of fully transparent active ETFs has changed the game. These funds provide advisors with a timely, daily look inside portfolio managers’ decision-making processes.Key Takeaways Pre-Call Positioning Predicts Delivery: Active ETF buying in the 15 days before an earnings event anticipates favorable vocal affect from sell-side analysts and corporate executives. Driven by Soft Information: The vocal tone component tied to pre-call trading is associated with subsequent market-adjusted abnormal returns in the post-call window. Active ETF Demand has been robust: The $42 billion DYNF and the $39 billion CDGV are two of the many popular fundamentally focused active equity ETFs. ETFs like the $42 billion iShares US Equity Factor Rotation Active ETF (DYNF A-) and the $39 billion Capital Group Dividend Value ETF (CGDV A) show how active ETFs have gained traction. Beyond providing real-time positioning, daily transparency allows us to perform deep analysis on active ETFs as a group. This includes the ability to evaluate how active managers seek an edge before earnings results hit the tape.Listening Between the Lines of Earnings CallsTMX VettaFi recently spoke with Ziwei Zhao, assistant professor of finance at the University of Lausanne. She discussed findings from a paper she co-authored with Alan Huang, Russ Wermers, and Jingyu Zhang. The paper is titled “Positioned Before the Call: Active Equity ETF Trading and Earnings Call Voice.” The paper highlights the power of daily active ETF transparency. The authors found that, in general, active equity ETF positioning anticipates the “vocal affect” (VA) — or nontextual tone — realized during earnings conference calls. While an earnings release puts hard numbers on paper, the conference call produces a vital layer of soft information. How analysts ask questions and how executives deliver answers matters deeply to price discovery. Evaluating daily flow-adjusted reweightings over the 15 trading days before a call shows a clear pattern, according to the authors. Higher net buying — measured through changes in portfolio weights after adjusting for ETF flows — predicts more favorable vocal affect in analyst questions and executive responses. This relationship held, according to the paper’s authors, even after controlling for transcript text tone, earnings surprises, and stock-specific variables. Sell-side analysts operate independently from the active funds holding the positions. Therefore, their vocal engagement offers a useful gauge of the pre-call signal. Active ETF managers are not just positioning for a headline beat. Their pre-call positioning predicts the vocal affect subsequently observed in the Q&A.Unpacking the Pre-Call Information NetworkWhere does this pre-call edge originate? Source tests show that active ETF managers and sell-side analysts respond to distinct elements of the pre-call environment. Hard economic news and peer firm earnings surprises drive fund positioning. Meanwhile, peer analyst tone drives question affect. Crucially, according to Zhao and her colleagues, what moves both portfolio managers and analysts is the gap between scripted executive remarks and the live exchange. Furthermore, peer positioning predicts analyst tone across shared issuer networks. This association extends well beyond formal organizational boundaries. For advisors evaluating active ETFs ahead of earnings season, daily transparency offers value beyond simple holdings tracking. By anticipating both the numbers and how management delivers them, active ETF managers demonstrate a distinct approach to price discovery. For more news, information, and analysis, visit the Equity ETF Content Hub.