Stock price prediction with alternative data

Earlier this month, VPRO’s Tegenlicht brought an interesting broadcast on so-called ‘alternative data’, to predict who are the winners and losers on the stock exchange. This topic was discussed extensively in the De Dataloog podcast, as well as other surprising data news.

Where previously investors had to wait for annual reports, analyst reports, quarterly data and press releases released by companies, the use of endless amounts of data from other (usually public) sources has proved highly profitable for large investors. This “alternative data” turns out to be a good predictor of the rise or fall of certain prices.

All the data collected on us appears to be a good predictor of the stock market, as discussed in the De Dataloop podcast, which airs surprising data news every four weeks alongside Computable. An analysis of the credit card statement data of millions of people can predict the numbers of some companies with great accuracy. And a company like Thinknum helps investors by analyzing all the data from social media sites for signs that can tell what a particular stock will do.

sigh for the data

The search for data to help investors understand better doesn’t stop with credit card information and Twitter posts. The emotions in the voices of the CEOs are also analyzed by the company Helios Life Enterprises, which manages to deduce from each sentence whether the person in question is cheerful, self-confident or irritated. Data on the flight movements of CEOs can also be important. Suppose two corporate jets often land in the same place, could this be an indication of the merger of two companies?

Who has access to all this valuable predictive data? So far, it has mainly been large investors such as hedge funds that have paid billions of euros a year to access these data sets. But for investors with a small portfolio, accessing this data is difficult. In “Insider trading”, Tegenlicht offers insight into how new data streams are changing the stock market and who will benefit the most. Watch Tegenlicht’s full broadcast here (text continues after video):

Financial regulators

The Datalog, 22 September 2021

The influence of alternative data on the stock market was only one topic during the Data News of the De Dataloog podcast on September 22, 2021. Attention was also paid to safety in education and the relaunch of the fax. Listen to the whole broadcast now!

In addition to the broadcast, Tegenlicht provided an explanation when the use of alternative data becomes insider trading and therefore when it is prohibited. Arnoud Pijls, assistant professor of corporate law and capital markets at the Erasmus School of Law, shed light on this. Large investors such as hedge funds buy large amounts of data, from which they can extract very valuable information about listed companies, before the rest of the investors can see it. Pijls believes that the alternative data deserves the attention of financial supervisors.

“It’s an innovation in the financial markets that really fascinates me,” Pijls explains to Tegenlicht. But I also immediately thought about the level playing field that the stock exchange should be. All stock market participants, from large hedge funds to retail investors, should have the same information available at the same time. Otherwise, confidence in the stock market may deteriorate and the stock market will perform less well in the long run because fewer people are inclined to trade on the stock exchange. ‘ Pijls thinks the regulator will pay attention to this data trade, but it won’t be banned immediately. Regulation in this area is expected, but not that it will be completely blocked.

More news on the data

Podcast De Dataloog also discussed the following data topics in the newsletter Date of September 22, 2021:

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The dates off the agenda

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