federal contract prime subcontractor momentum
What it checks
When government contract flow surges in a NAICS sector, we go LONG firms in that sector (excluding the direct prime contractor) as subcontractor beneficiaries.
Mechanism
Government contract winners earn positive abnormal returns; the effect propagates to subcontractor-class firms in the same NAICS but the market under-prices the second-order beneficiary.
Signal rule
30d rolling federal-contract awarded_amount per focal NAICS (excl. focal own), 365d z>1.0/1.5 -> LONG 30/60/90d.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
federal_contractsWorker data table, see services/worker schema.
Expected edge
- Paper window
- 1985-2010 (Belo et al.)
Subcontractor-class lead-lag of Belo-Gala-Salomao-Vitorino direct-prime return effect.
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
federal contract award driftEvent-DrivenFederal contract awards lock in revenue visibility 30-60 days before the sell-side catches up. Strongest in defense primes (LMT, RTX, NOC, GD, BA, LHX, HII) and IT services (LDOS, SAIC, CACI, BAH). A contract award whose total_obligation lands in the top decile of the ticker's prior 5y award distribution opens a long T+1, held 30/60/90 days.
industry lead lagAlt-DataInformation about industry-A fundamentals diffuses slowly to firms in industry-B that are economically linked. Menzly-Ozbas (2010, JF) show upstream industry returns predict downstream industry returns at 1-month horizon, with the slowest diffusion in retail-light / illiquid names. We approximate "upstream industry" by using the broad market (SPY) and the ticker's own sector ETF as proxies (the weak-form version of the family until the BEA input-output customer-supplier matrix is loaded).
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