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Waters Technology: Raising the Standard(s) for Alt Data

Thu June 6, 2019

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With alternative data on every firm's agenda, Max looks at efforts designed to make it easier to integrate new data sources into investment strategies, and why standards for alternative data represent an important step forward.

Introduction: There's a reason data professionals aren't known for their success at office politics: Anyone with political ambitions of any sort generally needs to be willing to bend the facts to suit their agenda.  In contrast, those who operate in the market and reference data industries are, by and large, sticklers for accuracy, charged with preserving golden copies of the truth about an instrument or a company.

Excerpt: In the world of financial data, there are different approaches to this: One is to come up with proxy measures that demonstrate the value of a dataset. For example, alternative data analytics provider Lucena Research has recently partnered with events data vendor Wall Street Horizon to create trading strategies that combine WSH’s alternative data with Lucena’s predictive analytics. Lucena’s Wall Street Horizon Short strategy (based on firms’ postponing of their earnings dates) outperformed the market by almost 25% during its first two months of tracking the data between February and April this year. The strategies are an example of how vendors can demonstrate the value of their proposal, and also the suitability of data for a client’s specific investment strategy—for example, a long equity fund won’t want data whose greatest returns transpire when used in short strategies.