Alternative Data in the Financial Markets
The COVID-19 pandemic has led to an increased use of alternative data by investors to supplement traditional sources of information such as financial statements and annual reports. Alternative data, which includes unconventional sources like satellite imagery and credit card data, has become a game-changer for investors seeking to make more informed decisions. In fact, according to EY, 78% of hedge funds now use or plan to use alternative data. As an example, the article outlines building a model to predict the effect of speeches by Federal Reserve Board members on financial markets. However, it also highlights the importance of understanding the limitations and potential risks of using such data.