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Alternative Market Briefing

AI founder says 90% of investment signals from AI algos, alternative data are false

Thursday, May 30, 2019

Laxman Pai, Opalesque Asia:

Alpha Vertex, a financial technology company, sees untapped opportunity in advanced natural language processing (NLP) and machine learning tools to extract information - such as investment signals - from unstructured, text-based datasets with broad coverage.

To tap this opportunity, the company which offers analytical solutions powered by proprietary AI algorithms to financial institutions and investors, has announced the launch of Alta, its alternative data product.

Created with alternative datasets using big data techniques such as NLP, anomaly detection, sentiment and relation extraction, Alpha Vertex's AI algorithms produce informational advantages and detection of new investment risk profiles for investors.

Alpha Vertex claims that it takes care to control model complexity to avoid over-extrapolation and rigorously tests for the probability of false discovery. Its alternative data product and a few of its machine learning models are currently in use by a multi-billion dollar hedge fund.

The use of alternative data products to glean insights is nothing new to hedge funds who have been early adopters of the solutions. In 2018, Deloitte predicted that alternative data will likely transform active investment management over the next five years.

Yet, studies and leading research reports have demonstrated that most ML models and investment strategies - which use alternative data and other datasets - uncovered by companies ......................

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