How Alternative Data Began
Alternative data has revolutionized the way businesses and investors operate. By using information that isn’t found in traditional financial reports or balance sheets, companies can glean valuable insights into market trends and consumer behavior.
The Emergence of Alternative Data
Over the last two decades, the usage of alternative data has rapidly grown. As traditional financial data became more accessible, analysts and investors began looking for new sources of information that could provide a competitive edge. This led to the exploration of unconventional data sources.
Types of Alternative Data
- Supply Chain Data: By examining a company’s suppliers, valuable insights can be gleaned, such as production numbers and future revenues.
- Consumer-Level Data: Information about individual spending habits can reveal trends about consumer preferences.
- Social Media Sentiment: Analyzing social media interactions and comments can provide insights into public perception of a brand.
Challenges in Utilizing Alternative Data
Alternative data is often raw and unorganized, requiring significant effort to analyze and extract valuable information. Trusting the data and incorporating it into investment decisions requires backtesting and rigorous validation.
- Alternative data emerged as a valuable tool for investors seeking additional insights beyond traditional financial data.
- Different types of alternative data provide unique insights into various aspects of a company’s performance and public perception.
- Utilizing alternative data presents challenges in terms of analysis and confidence, requiring systematic and rigorous testing.