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What is Alternative Data?

What is Alternative Data?

Alternative data refers to information used to gain insights into a company that is not found in traditional financial reports. This data offers unique perspectives on performance, trends, and future prospects.

What is Traditional Data?

Traditional data is simply data that can be acquired from publicly available sources. In finance, this typically means disclosures that are required by public companies. Examples include:
  • Financial statements
  • Annual reports
  • SEC filings
  • Earnings reports and transcripts
  • Market Data

Examples of Alt-Data

  • Satellite and Geolocation Data: Satellite imagery and geolocation data can provide insights into factors such as foot traffic at retail locations, crop yields, construction activity, and shipping and transportation trends.
  • Social Media Data: Monitoring social media platforms for trends, sentiment, and public opinions about companies, products, or industries can offer valuable insights into consumer behavior and market sentiment.
  • Job Postings and Hiring Data: Monitoring job postings and hiring trends can offer insights into industry growth and company expansions.

Who uses alt-data and why?

Investors use alternative data to gain insights into market trends, make more informed investment decisions, and identify potential trading opportunities. For example, analyzing social media sentiment and web traffic data can help investors gauge public perception and interest in a particular stock or industry. They may use satellite imagery to assess retail traffic or analyze credit card transaction data to predict consumer spending patterns.

The Marketing and Advertising industry use alternative data to refine their campaigns and target specific audiences more effectively. Retailers use foot traffic and online shopping data to understand consumer behavior and optimize their store locations.

Key Takeaways

Alternative data is powerful for investors for several reasons:
  • Unique Insights: Alternative data provides investors with insights that are not easily obtainable from traditional financial statements and market data. This can lead to a competitive advantage by uncovering trends and opportunities that others might miss.
  • Early Detection of Trends: Alternative data can offer early signals of emerging trends and shifts in consumer behavior, market sentiment, or industry dynamics.
  • Granular and Real-time Information: Alternative data sources often provide granular, real-time, and high-frequency data, allowing investors to monitor developments on a more detailed level and respond to changes faster.