Big write-up this past weekend from Barron's on Big Data (sub required). Some salient points:
- Gone are the days when a portfolio manager could rely on quarterly reports and sellside equity research in determining stock selections. Today, social media sentiment analysis and credit card swipe data are being incorporated into investment theses.
- Big investors like JP Morgan are holding data science "hackathons" to crowd source investment ideas from data scientists and statisticians. The most basic approaches to investing are being completely rewritten.
- Financial data (a focus of this blog) is a massive market - over $28 billion - and while alternative data is a tiny fraction of that - about $300 million, according to Greenwich - that share is growing rapidly.
- Even the most mundane digital activity can be repurposed as alternative data: web visits, parking lot activity, toll booth take.
Over time, my suspicion is that alternative data will become just "data" - part of the suite of information inputs that will form a fundamental basis of investment decision-making, perhaps no more special that public markets data or filings. Which of course begs the eternal question: where will alpha come from next?
Good read, highly recommended.
- Kevan Huston