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A Big Data Strategy Is Key To Achieve Greater Alpha

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Big Data Strategy

Big Data Strategy

Big Data Strategy-Advantages and challenges abound for investment professionals focusing on big data, large data sets analyzed computationally,  and alternative data, data sets obtained from less traditional sources, such as social media, for investment analysis.  At the fifth annual TradeTech FX conference, a panel of data scientists and quantitative professionals gave recommendations to investment professionals looking for ways to capitalize on big and alternative data analysis.  “In a day of data explosion, it’s imperative for all companies to have a thoroughly examined data strategy, and the right methodologies need to be applied to the right data sets,” said Larisa Mathur, Founder of VNR Partners, a fintech company. Otherwise, “big data can be a drain on resources, if not used properly.”

Larisa MathurVNR Partners

Discerning the valuable information from noise is a monumental task. Taking time to focus on what golden nuggets can be found in big data is extremely important. Sash Sarangi, Senior Researcher in the Fixed Income Group of Invesco, observed that “Not all news are created equally. People look at sentiment for western markets but how does this work for emerging markets?”  It is important for investors to spend time researching the sentiment drivers that are important for different markets. “Look at your hypothesis and test it” said Sarangi, who helps develop factor products in rates, foreign exchange, and credit. “Intelligently mining the data is critical or you will be lost.”

Sash SarangiFDO

However, analyzing data can be endless. ‘Analysis can lead to paralysis’ cautioned Sarangi. According to Mathur “Companies that figure out a balance have a competitive advantage over competitors in terms of efficiency and speed to market for their strategies.”  Superior data sets and methods of extracting information from data can give investors significant advantages in investing. According to Christina Qi, Partner at Domeyard LP, a Cambridge, Massachusetts-based hedge fund, “A data set or method of data extraction can be superior in many ways – often something “cleaner” makes a huge difference by significantly reducing the time-to-market for our trading strategies.” Qi further stated that “Like most other firms of our type, we have to spend most of our researchers’ time on data cleaning and preprocessing, and payroll and infrastructure contribute to the bulk of our operating expenses. We think there’s a lot of more room to improve productivity and reduce the time spent in this dimension as compared to improving your signals.”

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Article Credit: Forbes

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