Wall Street Horizon CEO on Leveraging Alternative Data to Generate Alpha
Tue April 25, 2017
As the data arms race in the investment industry continues to escalate, investors and traders are increasingly looking to sources off the beaten path to gain their edge. This, in turn, has led to the rise of alternative data providers as a key component for alpha generation. Beyond the traditional financial and economic numbers, investors and traders are now gleaning insight from unlikely datasets, including social media sentiment, satellite imagery, location-based check-ins, and more.
For event-driven financial firms that build their trades around date-specific market developments, nothing is more essential than the datasets that Wall Street Horizon delivers. From earnings dates, investment conferences, product release dates and even M&A activity events, Wall Street Horizon captures all potentially market-moving dates and delivers the data to clients through readable feeds to be easily incorporated into trading algorithms or financial models.
Equities.com Broadcast Contributor Silvia Davi had the opportunity to speak with Wall Street Horizon CEO Barry Star to learn more about how modern traders are utilizing the company’s datasets, and what more may be coming down the pipe.
EQ: Wall Street Horizon focuses on providing institutional investors and traders with "alternative data". Can you explain this type of research and its value to investors?
Star: We don't get hung up on how the information we're offering is characterized. At the end of the day, we have a singular focus: to ensure that the 40+ event types we track are the most accurate and timely in the business. From quants, whose models leverage our datasets, to market makers who operate at microsecond speeds to fundamental investors who want to determine the optimal timeframe to put a position on, investors of all stripes use our data as the fuel to power their trading strategies, which we're extremely proud of.
EQ: How does this compare to other newer resources, such as satellite orbital data, that seems to be the biggest new research trend?
Star: The ability to leverage datasets that were previously unavailable is opening new doors to investors every day. While there's no question that we operate in a very specific niche of the industry, we see the information we provide as some of the best event-driven information for alpha generation out there.
EQ: You are in the business of "street events & calendar dates." Define what key events you track and who are your clients?
Star: We track over 40 different event types and provide both forward-looking and historical datasets for events, such as earnings dates, dividend dates, options expiration dates, splits, spinoffs and investor-related conferences. We're continually working with our client base to determine what dates they'd like to see next, which is how we ended up adding the FDA's PFUDA dates last year, and movie release dates this year. Our clients are primarily investors and traders ranging from extremely short-term electronic market makers to the largest long-only asset managers. We're also increasingly seeing non-investors make use of our data, such as Investor Relations Officers who use it to track competitors and plan events, as well as government officials who use it to power their models.
EQ: What are some of the biggest trends and stock movements you have seen thus far in 2017 that were impacted by specific events?
Star: Unexpected, and even known-event date changes, are volatility events, which makes accurate and timely knowledge of them very important for traders. For example, a few years ago there was a story in the Wall Street Journal about how some investors were burned when Apple (AAPL) changed its earnings date. These investors researched what they thought was Apple's earnings date on a website using data provided by one of our competitors who doesn't clearly differentiate between an estimated and confirmed date. So, when the company pushed it back a week, a large number of investors who bought a weekly contract in hopes of capturing the Earnings Premium received an unpleasant surprise. That's why we sweat the details — such as marking a date confirmed or estimated — to the extent that we do, and that's why our data is so valued.
EQ: Some of your products include multi-quarter forecasters, indicators, and the "Enchilada". Can you describe these services?
Star: We named Enchilada with a bit of a tongue-in-cheek approach, but we felt like it was the most descriptive name. It's literally our entire dataset — in other words, the whole enchilada — all provided via a web-based front end. We also provide our data in a machine-readable format that quants plug into their models, as well as low-latency data push for those for whom speed matters.
EQ: The ETF market continues to grow. Can you highlight any ETF-specific research or resources you provide?
Star: ETFs are one of the fastest-growing asset classes in the market, being used by investors, advisors and traders alike. We offer the only 12-month rolling forecast of ETF distribution dates and amounts. These forecasts are great for option traders and portfolio rebalance planning.
EQ: How has the interaction between issuers and investors evolved?
Star: In general, I think things have never been better for investors across a whole range of areas, and information flow from issuers is one of many examples. With the implementation of Reg FD in 2000, all investors — not just those generating the most in commissions — have equal access to public information provided by issuers. That's obviously beneficial for many different disclosure points, including for the events that we track. That said, these events are not always disclosed by companies in the same way, and some can make it quite difficult to obtain, but we do the dirty work of finding and categorizing this information so our clients can focus on what they do best.
EQ: Lastly, has this new political environment impacted your business?
Star: We haven't really seen any difference. That said, we're over eight years into this bull market, and if history is any indication, I'd expect there to be a correction at some point in the not too distant future. Once that happens and volatility increases, that's when our data's value becomes even more apparent. As long as there is volatility in the market, we will be there to help navigate it – allowing clients to either trade into the volatility or trade around it.