How alternate data helps institutional investors

What is alternative data?

Alternative data generally originates from non-traditional data sources, so that when they are analyzed via analytics engine, they deliver additional insights that complement the information already available from traditional sources.

While most other forms of alternate data need you to ask the customer for a specific document or needs you to go through other formalities, web data can help you gather a lot of information about a person without the need of going through too many hoops. You can analyze social media data from different websites, as well as location tags of images uploaded by a person to gather a lot of information about him. For example, if a person has mentioned New York as his place of permanent residency but there’s no record of him owning any property or having a rental agreement in the city, then there might be a possibility that he is lying. Similarly, you can check out his job details, where he is currently working, what position he is holding, where he has worked before, all from social media data, or even company or university websites.

alternative data for institutional investors

Why alternative data is so important for institutional investors?

What matters the most for Investors is the quality information that helps them minimizing potential risks and scaling up the profitability. With the rise of big data and machine learning, now we are able to turn large unstructured data into structured content that can easily be analyzed, manipulated and deployed in financial applications to enhance performance and profitability.

What are some popular types of alternative data?

App Usage – Data gathered from app engagement and reviews. There are some popular use cases like gaming, streaming and food delivery services.

Credit/Debit Card – Transaction data of credit and debit cards. It is one of the most useful and most expensive alternative data sources. The accuracy of this type of data is always appreciated.

Email/Consumer Receipts – Transaction data from email receipts. This data is considered very accurate, but panels are smaller than credit/debit card panels.

Geo-location – Traffic data available from bluetooth beacons and WiFi signals. The use of these data is mostly in geography-specific retail foot traffic tracking.

Public Data – Data available from all public resources. It is one of the toughest forms of data to handle with. These types of data are usually not clean.

Satellite/drone shot – Data gathered from image processing of satellites and drones. It is quite expensive but not very consistent in quality.

Social/Sentiment – Data collected from text processing of social media sites, news portals, and other sources.

Survey – Data collected from different surveys. Here, the quality depends upon the variety and size of the panel.

Weather – Data on weather patterns collected from the respective sensors. The most popular use cases are agriculture and commodities.

Web Data – Data scraped from websites which are available publicly. It covers the widest range, highly accurate, extremely raw and relatively inexpensive; specifically when acquiring it from any DaaS provider. It is the most reliable alternative data source for institutional investors.

Web Traffic – Historical data of users visiting a certain website. This is widely used for tracking e-commerce efforts.

Which is the best form of alternative data among these?

Web data is considered as the best form of alternative data among these. It is by far the widest coverage and one the most inexpensive source. Some of the other forms of alternative data are also get updated on the websites periodically for public use and web data covers those as well. Scrapped data from the web and often very raw in nature and more flexible to work with.

Although web data seemingly the most useful alternative data, it is the most unstructured form as well. It consists of different formats like text, images, videos, charts and so on. To clean and turn this into a usable format is not an easy task always. Therefore, you may need to consider outsourcing to any fully managed web scraping service provider like PromptCloud that deliver you data in your desired plug-and-ply formant.

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