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Cost of 'alternative data' is becomiong prohibitive

Thursday, February 02, 2017
Opalesque Industry Update - The buy side today has access to data and information that would have been unheard of 20 years ago. Whereas in the past they relied primarily on research and information from their sell-side trading counterparties, today they have as much, if not more, real-time access to news and information than their dealers do.

The downside to this change, however, is that finding an edge in investing is harder than ever. With data access so ubiquitous, finding the needle in a haystack that no one else has found often feels impossible. This is where alternative data enters the picture.

Crowdsourced research and social media sentiment analysis fit that bill and have captured the interest of investors and fintech providers around the world. But confining your view of alternative data to a Twitter stream limits the potential alpha. Private company business performance, logistics data and satellite imagery can and already do create alpha for investment strategies that need insights beyond what the most commonly analyzed data can provide.

But roadblocks to alternative data access remain. Concerns over cost, data completeness and integration are holding back investors from what, in theory, seems to be an obvious step forward. For those that can solve these issues first, however, utilizing unique data sources such as private company performance information, social media sentiment or satellite imagery, investors can once again find an edge on their competition with the resulting alpha the prize... To read the executive summary, click here:

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